Yahoo! (NASDAQ: YHOO) shares traded at $29.70 after hours Friday as it appeared that a buyout deal from Microsoft (NASDAQ: MSFT) was likely. Now that Microsoft has walked away after offering $33, where does the Yahoo! stock price go?
Probably to about $22. Here are the reasons why:
1. Yahoo! traded at $19 the week before the offer.
2. Yahoo!'s earnings for Q1 were only modest. So were its forecasts. No one on Wall Street believes the company's aggressive three-year projections. This actually puts some downward pressure on the stock.
3. Microsoft may come back. Their new offer, probably several weeks off, if they make one, will almost certainly be below its initial $31 price point because Yahoo!'s shares will have fallen. A new MSFT offer will probably be in the $25 to $27 dollar range. This should give the stock some support.
4. Yahoo! could outsource some of its search functions to Google (NASDAQ: GOOG) and potentially save hundreds of million of dollars in personnel. Google does a better job of making money from search ads, so a transaction with the search company could also improve revenue. This should help keep Yahoo!'s share price from collapsing. There is a chance the the federal government would view a deal between the two largest search companies as anti-competitive.
5. There is still a chance the Yahoo! could do a transaction with News Corp (NYSE: NWS) for MySpace or Time Warner (NYSE: TWX) for AOL. It is tough to handicap what this would do to the Yahoo! shares.
Look for the Yahoo stock to settle at $22 in the next week.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
5-04-2008 @ 9:28AM
peggy said...
Your arguement is lame. You think Yahoo doesnt have value now? Why do you think MSFT wants it so bad? Now that MSFT is gone it is no longer a value? Will advertisers want only one place such as google to survive? Will media companies only want one place such as google to survive? The list goes on. The internet is still wild, wild west. Its not Monday yet, anything can happen.
5-04-2008 @ 12:25PM
BOB M said...
Yahoo will drop below $19 on Monday due to selling frenzy, then it will rebound to $20 - 22 per share by thursday. Yahoo is a goose that has been cooked (Yang can cook). Microsoft will be back but as a hostile takeover because they will buy the stocks in the upper teens and lower 20's and will force Yahoo into a $26 deal
5-04-2008 @ 1:17PM
gogofaster said...
If you think YHOO gained short term value after being spurned by MSFT you have another think coming. YHOO shares are going to hit $16 Monday morning thanks to mass investor retail investor exodus and settle somewhere around $20 if not lower. Doldrums south of there until the shareholder meeting in a few weeks; after that it's anyone's guess.
5-04-2008 @ 8:20PM
YABLUE said...
This stock will el' tanko tomorrow in a huge way. People were hedging on a deal and bail big time tomorrow. This stock will drop like a rock to the low teens. Just like Yang's EGO will drop like a lead balloon. What an idiot of a CEO!!!!!!!!!! He couldn't run a popcorn stand. HA HA HA. Glad I dumped the damn stock last week cuz I know who was handling the cards, a pure loser!!!!!!!!!!!! This is a huge mistake this man has made, especially on behlaf of the stockholders...