Youssef Squali: How Do Analysts Value Yahoo’s Core Business?

December 8, 2015, Market Realist

Yahoo still shows positive signs

Yahoo (YHOO) is currently holding a 15% stake in Alibaba (BABA), worth around $32 billion, and a 35% stake in Yahoo Japan, worth of $8.5 billion. This massive stake has caused concern about the worth of Yahoo’s core business. Citigroup analyst Mark May claims that Yahoo is still able to attract 200 million visitors from the United States to its web portal, so Yahoo is only behind Google (GOOG) and Facebook (FB). That makes Yahoo more valuable than what investors are expecting.

Valuations and growth drivers

Mark May estimates that Yahoo’s internet business, consisting of search and advertising, could value at five to six times its forward EBITDA1. With this multiple, the enterprise value of Yahoo’s internet business could fall between $3.4 billion and $4.1 billion, compared to what investors estimate is 2.5 times of EBITDA or an enterprise value of $1.7 billion.

Youssef Squali, the analyst at Cantor Fitzgerald, reported Yahoo’s search business to be highly profitable when compared to other business units that drive the majority of the visitors. Search is followed by Yahoo Mail and Yahoo News. Cantor Valued Yahoo’s core business at $3.9 billion, or $4.12 per share.

Yahoo holds a 0.62% stake in the PowerShares QQQ Trust (QQQ), a portfolio of 107 stocks.