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Is Yahoo! Inc. (YHOO)’s Bubble Burst Just Around the Corner

Yahoo! Inc. (NASDAQ:YHOO)‘s investors who have shown great enthusiasm in the company because of Alibaba Group Holding Ltd (NYSE:BABA)’s IPO are soon about to face the harsh reality that Yahoo is not as good a business as they thought it is. CNBC discussed Yahoo! Inc. (NASDAQ:YHOO)’s health as a business  today with senior analyst at JPM Securities, Ronald Josey.

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“[…] Frankly we here think that Yahoo! Inc. (NASDAQ:YHOO) will, investors will likely focus more on operations and that is something that they are in a turn around. We do have, we are focusing on their display business which isn’t growing very quickly or at all and so we are looking for a turnaround […],” said Josey.

It is very hard to find any flaw with Alibaba Group Holding Ltd (NYSE:BABA) as a business, which is currently growing at more than 40%,according to Josey, and that will in all likelihood make today’s IPO a success.

However,  what does that mean for Yahoo! Inc. (NASDAQ:YHOO)? It means an investment that is worth $20 to $25 billion  but what good as it if Yahoo! Inc. (NASDAQ:YHOO) cannot invest it profitably. Yahoo! Inc. (NASDAQ:YHOO) has not revealed any concrete plans on focus areas for the money that the company is just about to be handed out.

If the investors in Yahoo! Inc. (NASDAQ:YHOO) are relying on the stake that the company has in Alibaba Group Holding Ltd (NYSE:BABA), they don’t have to keep Yahoo in their portfolios after today. They can go ahead and purchase Alibaba directly instead. This will have serious consequences on Yahoo’s stock price which has risen significantly in the wake of Alibaba’s IPO.

Exactly how many of these investors had temporarily parked their funds in Yahoo! Inc. (NASDAQ:YHOO) to play Alibaba pre-IPO, will be revealed today and in a few more days as investors move their funds to their final destination. As of right now Yahoo! Inc. (NASDAQ:YHOO)’s stock price stands at $42.08.

Disclosure: none

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