Yahoo Drama Explained - One of the oldest and most well-known online companies, Yahoo [yahoo.com], may be putting its core business up for sale. The WSJ's Rick Carew explains why in the video above (published 2 Dec 2015).
"Yahoo’s Core Business EBITDA has been decreasing at an alarming rate. In fact, in Q1 and Q2 of 2015, Yahoo’s Core Business became free cash flow negative. Additionally, on a year-over-year basis, the magnitude of the decline keeps continuing and accelerating without benefit of lapping or stabilizing. This should be enormously alarming for management and the Board." --Letter (pdf) from activist shareholder Starboard Value LP to Yahoo Board of Directors, August 10, 2015.
|Above: Yahoo 5-year stock chart ($YHOO) as of 3 Dec 2015 (source: google.com)|
Citigroup analyst Mark May: Yahoo’s core internet businesses could be valued at roughly five to six times its forward earnings before interest, taxes, depreciation and amortization. At that multiple, the enterprise value of the Internet businesses could fall between $3.4 billion and $4.1 billion. Investors are currently valuing it at 2.5 times forward EBITDA, giving an enterprise value of $1.7 billion.
Cantor Fitzgerald analyst Youssef Squali: A multiple of 4X EBITDA because of the core business maturity and more limited growth potential which values the businesses at about $3.9 billion, or $4.12 per share. Among Yahoo’s core internet assets, only the search business is profitable.