Yahoo! Inc. (YHOO), Google Inc (GOOG): Is This Silicon Valley Star Ready for Its Closeup?

Aside from this hiccup Mayer has really been executing well and the stock has been surging (up 57.82% over the last year) since Mayer’s tenure after a series of CEOs that disappointed and lowered morale. As a former Googler, Mayer knows her competition inside out and rumors of partnering with Google Inc (NASDAQ:GOOG) nemesis Apple Inc. (NASDAQ:AAPL) on more Yahoo! apps for iOS have been heating up.

Mayer is working hard to deserve a $36.6 million pay package (mostly stock), almost exactly what Bob Iger, CEO of content titan The Walt Disney Company (NYSE:DIS) makes. Content is what will make Yahoo! advertisers pay up for new users. Yahoo! is not held back by Google Inc (NASDAQ:GOOG)’s necessary attention to tablets and Android nor by Amazon.com, Inc. (NASDAQ:AMZN)’s Kindles and e-tail. Yahoo! is not constrained by Netflix’s need to lure new subscribers, now at 36 million and counting. And Yahoo! which competes in search against Bing doesn’t have to worry about software and Surface tablets like Microsoft Corporation (NASDAQ:MSFT).

Yahoo! could be shaping up to be a media giant like an early Time Warner or NewsCorp without the dead weight that is the newspaper business.

The stock is at a compelling valuation compared to Amazon, Netflix, and Google Inc (NASDAQ:GOOG) at a 7.05 P/E. Unsurprisingly, Mayer’s compensation as well as COO Henrique de Castro’s at $39.9 million bumps up the corporate governance risk to a heady 10 (the worst.).

Google Inc (NASDAQ:GOOG), whose stock moved big in the last year, has a P/E of 24.50 but a slightly lower PEG of 1.18 to Yahoo’s 1.29.

Netflix with a 515 P/E and an 8.11 PEG is not a value name. It has run 162% over the last year, 20% just since earnings. It just lost 1,800 movies from its archives. Considering it has a library of 75,000 that are constantly in flux with new agreements and expirations, this isn’t a big deal. However, it has few original hits: Lilyhammer, Arrested Development, and House of Cards. This summer it debuts a women’s prison comedy, “Orange is the New Black.”

Amazon, a name I like not on valuation but for e-tail dominance, has a forward P/E of 70.52 but a lower PEG than Netflix of 4.96.This stock has underperformed the S&P 500 rising only 10.23%. Understandable when the operating margin is 1.04%, like supermarkets’, razor thin. Yahoo’s is 16.44%, Google’s is 25.19%, and Netflix’s is 2.23%.

Amazon’s Prime ecosystem has to bring in customers to make their streaming a viable alternative to Netflix’. Business Insider noted between the two Netflix edges out as a better deal. Yet $79 a year for Prime with free shipping still seems like a better deal than $96 at Netflix on price alone.

It also has to have compelling original content like Netflix which gained 20 million subscribers after a free trial included House of Cards. Amazon Studios has 12 pilots featuring original children’s programming, animation and comedies with big names like John Goodman and Jeffrey Tambor. Amazon is urging its viewers to decide which ones get picked up. All the pilots and descriptions are available here.

The Foolish takeaway

Yahoo! could become a media powerhouse in just a few years at this pace. Its content ambitions are falling into place and as a stock it’s not a bad value.

What was a moribund search has-been whose stock was stuck in the teens is now ready for its closeup thanks to Marissa Mayer.

The article Is This Silicon Valley Star Ready for Its Closeup? originally appeared on Fool.com and is written by AnnaLisa Kraft.

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