Analyst Brings Up Valuation Concern in Yahoo! with Downgrade

Yahoo! Inc. (NASDAQ: YHOO) has been downgraded by S&P Equity Research this morning. What is different about this call is that the downgrade is on valuation more than on the traditional execution risks and misses of the past. S&P's equity team now rates this as a Hold, versus its prior Buy rating.

What is so interesting here is that Yahoo! recently saw its shares hit a 52-week high. The company is also a candidate to announce a very large special one-time dividend, based on that $4.3 billion that it has after taxes from the sale of part of its Alibaba stake. Whether this will be a buyback or a dividend remains to be seen, but our guess is that it will be a combination of both methods of returning capital to shareholders.

It should be noted that S&P Equity Research is an independent research firm and that this is not exactly a commission-based analyst call. Shares hit a new 52-week high of $19.16 this week. Shares are up nine cents at $19.00, and the 52-week trading range is $14.35 to $19.16. The last time shares hit $19 was back in April of 2010. Before that it was September of 2008.

Marissa Mayer has already proved her worth for shareholders, but we would note that Wall St. thinks that Yahoo! now is fully valued (unless it wants to raise targets) as the Thomson Reuters consensus price target is $19.08.

JON C. OGG

Filed under: 24/7 Wall St. Wire, Analyst Calls, Internet Tagged: featured, YHOO