Is Yahoo! Inc. (YHOO) Worth Buying in 2013?

Page 1 of 2

Yahoo! Inc. (NASDAQ:YHOO) has an impressive portfolio of web-based search and advertising services. The former continues to face robust pressure from Google and Microsoft, but we believe that Yahoo presents investors with an impressive turnaround play. Billionaire David Einhorn was taking a new stake in Yahoo last quarter (see David Einhorn’s newest picks).

GREENLIGHT CAPITAL David Einhorn

Obviously, Yahoo’s key play is in the online advertising market, which remains one of the most attractive growth segments of the economy. Helping Yahoo capture more search traffic is its transition into content, having agreements with CNBC, NBC and ABC. It is hoped that video content specifically will give a nice traffic boost to the company. Yahoo has also been hedging its deteriorating display ad revenues by tapping into the mobile segment more heavily.

To help refocus on search, e-mail and social networking, Yahoo has been selling off its non-core assets; this includes Yahoo’s sale of HotJobs to Monster.com in 2010. Yahoo has also been focusing on monetizing its Asian assets, including the recent sale of 43% of its stake in Alibaba for $7.1 billion. This cash is expected to go toward dividend boosts or share buybacks. The return on its Alibaba investment has been impressive, especially when considering it paid $1 billion for the entire stake in 2005. Assuming Alibaba can execute an expected 2015 IPO, Yahoo would be able to further monetize its remaining stake, likely seeing an even greater return on its original investment.

From a valuation standpoint, Yahoo trades well below its major tech peers. At 6x earnings, Yahoo is much cheaper than Google (22x), Microsoft (15x) and Comcast (17x). We are also encouraged by the search company’s long-term expected EPS growth rate, which comes in at an 11% CAGR.

Google Inc (NASDAQ:GOOG), meanwhile, also has a limited 5-year expected earnings growth rate of 13%. The Motorola acquisition has been putting pressure on the company, in part helping it to miss 3Q earnings by 15%. The move should still be long-term positive for Google given it couples the company’s highly-popular Android mobile operating system with a hardware segment. Billionaire George Soros’ was one of Google’s biggest fans after adding the stock to his portfolio last quarter (check out George Soros’ new picks).

AOL, Inc. (NYSE:AOL) offers global web services and provides online advertising solutions. AOL’s business spans online content, products and services that the company offers to consumers. AOL also owns and operates various third-party websites and runs one of the largest Internet subscription services in the U.S. The tech company trades at an outrageously low P/E of 3x, but its forward P/E is upwards of 20x. Jim Simons upped his stake almost 50% last quarter (see Jim Simons’ top picks).

What about Microsoft and Comcast?

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!