Top 5 Reasons To Buy Yahoo! Inc. (YHOO)

Everyone remembers Yahoo! Inc. (NASDAQ:YHOO) from the “old Internet.” But while it’s steadily increased in value for the past six months, it may not have fully realized the potential of its gains just yet. The former search king is intent on making a comeback and reversing its fortunes with innovative new ideas. Here are, in my opinion, the top five reasons to consider Yahoo as a potential investment.

1.) The Sum Of All Parts

Yahoo! Inc. (NASDAQ:YHOO) has roughly 1.17 billion shares outstanding and a market cap of about $26 billion.

On Feb. 15, Morgan Stanley produced a research note about Yahoo that focused on the value of the company’s significant Asian investments – Alibaba and Yahoo Japan. The note stated an estimate that Alibaba Group – which is widely expected to be preparing for its IPO – will do $2.28 billion in net income in 2013 and $3.55 billion in net income for next year. Analyst estimates suggest the company could go public with a valuation of up to $80 billion.

If those estimates are correct, Yahoo’s stake in Alibaba would be worth up to $11 billion after taxes, or roughly $10 per Yahoo share.

Additionally, Yahoo! Inc. (NASDAQ:YHOO)’s 35% stake in Yahoo Japan is worth just under $8.5 billion – equivalent to about $5 per Yahoo Share after taxes.

Yahoo also has about $6.5 billion in cash stashed away, which equals just under $6 per Yahoo share.

If you add all of that together, you’re in the ballpark of $21.

However, analysts suggest that Yahoo! Inc. (NASDAQ:YHOO)’s core business (advertising, search, mail, homepage, finance, etc…) is worth north of $10 billion, implying that Yahoo may be severely undervalued.

2.) New Management

Marissa Mayer — the wunderkind former Googler — has had a very positive reception as the new CEO of Yahoo! The investors like her, the employees love her, and everyone’s cheering for her. But she isn’t the only one responsible for undoing the damage caused by years of mismanagement and underinvestment. Since becoming CEO, Marissa has attracted fresh talent to fill many of the company’s major positions. Two notable actions were hiring Henrique de Casto – a former colleague of hers from Google – as COO, and appointing Max Levchin – founder of Paypal and Yelp chairman – to the board of directors.

While the team at Yahoo! Inc. (NASDAQ:YHOO) definitely has a difficult journey ahead of it, the company looks like it’s headed in the right direction, with the right people behind the wheel, for the first time in years.

3.) Acquisitions & Mobile