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Yahoo! Inc. (YHOO): Price Target Cut Ahead of Q3 Earnings

By Austin Angelo 

Yahoo! Inc. (NASDAQ:YHOO) is set to announce its Q3 results on October 20th. Ahead of the announcement, Laura Martin from Needham & Co. weighed in.

Last week, Martin reiterated her Buy rating on Yahoo’s stock; however, she cut her price target to $40, down from $55.

Martin commented, “We maintain our 3Q15 estimates of net revenue of $1.02B (down 7% y/y) and Non-GAAP EPS of $0.17 (down 68% y/y), but we lower estimates for 4Q15, FY15 and FY16, based on slower growth rates and lower profitability estimates.”

Referring to estimates for FY15 and FY16, Martin said, “We now expect FY15 revenue of $4.2B (down 5% y/y, 4% below previous estimates), and Non-GAAP EPS of $0.69 (down 57% y/y, 4% below previous estimates). We lower FY16 estimates to revenue of $4.12B (down 1% y/y, 5% below previous estimate), and Non-GAAP EPS of $0.69 (flat y/y, 16% below previous estimates).”

Martin attributed her price target cut to “lower FY16 estimates and higher WACC (weighted average cost of capital) tied to rising risk.” The analyst concluded, “We maintain our Buy rating based on a sum-of-the parts analysis that concludes that investors are getting YHOO’s core business for ‘free’ despite $988mm of expected EBITDA in FY16E.”

Laura Martin is a top rated analyst with a 73% overall success rate recommending stocks and a +25.4% average return per rating when measured over a one-year horizon and no benchmark.

According to TipRanks, out of 22 analysts who have recently rated Yahoo’s stock, 17 have rated is Buy and 5 have rated it as Hold. Based on ratings of these 22 analysts over the past 12 months, the average price target for the stock is $45, an upside of around 38% over current levels.