Yahoo!'s (YHOO) stock went down by more than 5% yesterday due to investor uncertainty around CEO Marissa Mayer's efforts to turn around the company.
Pre- Alibaba IPO, Yahoo was one of the few options U.S. investors could use to tap into the e-commerce market in China. Owing to its significant stake in Alibaba, Yahoo's stock rose by more than 30% over the past year, largely because of investor excitement about Alibaba's flourishing business.
Yahoo! shares went down 2.7% after Alibaba made its stock market debut on Friday, closing at $40.93.
On the second day of Alibaba’s public trading, Yahoo shares fell 5.5 % to close at $38.65.
Alibaba’s debut has made Yahoo about $5.1 billion wealthier. That's the amount of cash Yahoo is entitled to collect after selling 121.7 million shares out of the 524 million shares it holds in Alibaba and paying capital-gains tax of about 38%.
Backed by one of the most high-profile chief executives — ex-Google (GOOGL) exec Marissa Mayer — it is making inroads into the highly lucrative areas of mobile and digital video.
Yahoo has lagged other tech giants like Google and Amazon (AMZN). It has also failed to keep up with the advent of social media like Facebook (FB). Yahoo has remained stalled in a business that is predicted to dwindle.
Due to the cash influx, Yahoo is now in a position to make major acquisitions. Mayer has resorted to smaller acquisitions to bring on board fresh talent and technology.
But none of these acquisitions have had a significant impact on the core business, which continues to be outdone by very strong competitors. That doesn’t mean the company isn’t making any money at all; it is in fact growing profits.
As a result, the investing community — including hedge funds and private equity firms — are also beginning to revitalize the thought that Yahoo is a good takeover target at present because of its vast trove of cash, other assets and the colossal discounting of its core business.
Yahoo currently carries a Zacks Rank #3 (Hold).
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