What Will Yahoo!'s Mayer Do With All That Cash? (Update 1)
Yahoo! has had a number of CEOs over the past 12 months (Carol Bartz, Tim Morse, Scott Thompson, Ross Levinsohn and now Mayer), as well as a number of strategies. That's confused investors, and this change of plan may confuse investors even more. Barclays Capital analyst Anthony DiClemente said the development is "somewhat concerning." He noted a change in sentiment around Yahoo! recently, largely due to the positive buzz surrounding Mayer's hire and the buyback.
"However, given tonight's filing, we believe that concerns around a smaller-than-expected buyback could remain a headwind until investors get more clarity," DiClemente wrote in a research report. He rates Yahoo! equal-weight with an $18 price target.
Pivotal Research Group analyst Brian Wieser echoed those sentiments, suggesting investors take "a 'wait and see' approach." Wieser rated shares buy with a $19 price target.
Mayer's strategy, although not laid out in full, is reportedly to "leverage the company's strong franchises," and improve its focus on search. Wieser noted the change in strategies from Levinsohn to Mayer, as Mayer focuses more on growth initiatives, and "improve its core product offerings rather than to generate cash or profits as a first priority."
If the cash is not returned to shareholders and acquisitions are indeed a part of the plan, there are several names which have been mentioned before as potential takeover targets.
Hulu, The Weather Channel, and TripAdvisor(TRIP) were names that were floated as part of the cash-rich split deal between Alibaba and Yahoo! that ultimately went nowhere. Ironfire Capital founder and president Eric Jackson suggested others as well.
Zillow already has a relationship with Yahoo!, as the company runs Yahoo! Real Estate, one of the largest real estate portals on the Internet. Zillow could not be reached for comment on this story.
Investors have initially reacted to this news negatively, sending shares lower in Friday trading. Should Mayer successfully integrate one (or more) of the aforementioned names, investors might want to think otherwise.
Interested in more on Yahoo!? See TheStreet Ratings' report card for this stock.