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

Over the last few months Yahoo! Inc. (NASDAQ:YHOO) has been buying up content and creating original content to improve the user experience. It’s not too early to think about the Yahoo! Inc. (NASDAQ:YHOO) network.

Yahoo! Inc. (YHOO)Hooray for Hollywood!

In the last year mostly since the arrival of CEO Marissa Mayer, the company has doubled its original video content and increased its library of content with purchases of the rights to the entire Saturday Night Live archives, all 38 years from Two Wild and Crazy Guys to Stephon, and other content.

On April 29 the company announced a new lineup of original programming including: “Tiny Commando,” starring Ed Helms of “The Office” in which tiny P.I. fights crime (think Honey I Shrunk the Kids as a crime caper), “Losing Your Virginity with John Stamos,” a misleading title if I ever heard one; it turns out Stamos interviews celebrities about their first time; and “We Need Help,” two Hollywood powerbrokers abuse their shared male P.A. (think the Devil Wears Prada goes to Hollywood).

These shows are in addition to “The Fuzz” and “Ghost Girlz” (sic) all of which will be available to view on a binge (multiple episodes available at one time).

Yahoo! Inc. (NASDAQ:YHOO) has inked an agreement with World Wide Wrestling to feature exclusive video and content for them. In a more serious vein, Yahoo! Inc. (NASDAQ:YHOO) has also signed with ABC News and CNBC for exclusive content.

Of course, they had to have some lifestyle shows: Fashion Rescue, how to wear one article of clothing, Grill Girls, women take over the grill on a food lifestyle show, and Cinema & Spice, reminiscent of “Dinner and a Movie”.

Derivative? Maybe, but this is a promising direction for Yahoo! Inc. (NASDAQ:YHOO). It will be competing against, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX) with their own major moves into original programming.

Content’s not everything

All this is on top of the acquisition of Summly, the news summary app, and Flickr, the photosharing app. Mayer has kept the momentum going with an attempt to acquire a majority stake in Dailymotion, the French version of YouTube. Unfortunately, Yahoo! Inc. (NASDAQ:YHOO) was roundly rebuffed by the French government, not even an, “Ah, tres desolee.”

Mayer also announced a change to the maternity and paternity leave policies doubling it to 16 weeks for mothers and eight weeks for dads. This seems like an effort to pour oil on the waters after Mayer’s “Get Back to Work, You!” (thank you, Montgomery Burns and Matt Groening) edict calling all work-at-home employees back to the office received bad press indeed.

Pundits opined Mayer went too far and the fiat was strategically misguided. Aside from this showbiz initiative Yahoo! is still a tech company competing for topnotch techies against the behemoth, Google Inc (NASDAQ:GOOG). As well as competing against them on search and display ads, their bread and butter.

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, 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 and is written by AnnaLisa Kraft.

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