Reportedly, Yahoo! Inc. YHOO increased its stock repurchase program by $2.0 billion which will expire on Mar 31, 2018. Following the news, Yahoo’s share price rose 1.4%.
The new share repurchase program is an extension of the previous $5 billion buyback plan approved in 2013. Currently, Yahoo has $736 million shares remaining under the previous program scheduled to expire by 2016.
The buyback increase plan comes as part of the company’s preparations to sell its stake in Chinese tech giant Alibaba Group Holding BABA. Following Alibaba’s U.S. listing in September last year, Yahoo fetched significant returns, allowing CEO Mayer to buy time with shareholders as she endeavored to turn around the stressed core business. In January this year, Yahoo announced its plans to spin off the remaining 15% stake in Alibaba, to focus more on its core business.
Apart from rewarding shareholders, the new program will help Yahoo to boost its share price. The web pioneer plans to continue to repurchase shares from the proceeds it receives from the stake sale.
Yahoo’s business model reflects its commitment toward returning value to shareholders with its strong cash generation capabilities. We believe that the continued share buybacks will boost investors’ confidence.
Yahoo’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, share repurchases and acquisitions. During the last concluded fourth quarter, the cash and short-term investments balance dropped to $7.99 billion, down $3.20 billion during the quarter. Yahoo generated $111.0 million from operations, spending $67.9 million on capex, $545.2 million on acquisitions and $1.61 billion to repurchase shares.
Yahoo, currently, has a Zacks Rank #3 (Hold). A couple of stocks in the same space that are performing well include United Online, Inc UNTD and Autohome Inc. ATHM, sporting a Zacks Rank #1 (Strong Buy).
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