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YHOO - the bull case
- Thread starter xxxskier
- Start date
wtg indeed.
right now it's sitting at 34.25. Today up 9.25% (incl ah) on 65m volume (daily avg is 23m). Excellent.
Faber on cnbc today said precisely that when you consider yahoo's assets, the stock is cheap and that the value of the alibaba group for yahoo will be amazing.
Did you see the call volumes?? Jan 40's volume was 186k contracts!! Jan 35s, 63k. Nov 30 and 35s, 110k contracts. wow.
good luck!
right now it's sitting at 34.25. Today up 9.25% (incl ah) on 65m volume (daily avg is 23m). Excellent.
Faber on cnbc today said precisely that when you consider yahoo's assets, the stock is cheap and that the value of the alibaba group for yahoo will be amazing.
Did you see the call volumes?? Jan 40's volume was 186k contracts!! Jan 35s, 63k. Nov 30 and 35s, 110k contracts. wow.
good luck!
Guess it was just a matter of time before the MSFT's YHOO's, EBAY's, ETC...old 1999 flyers got going again.
I think this alibaba and media hype on calls is the kiss of death. They did this with MU.
I say dump it if you have profits but is this an EMC/VMW situation?
Or will this get retardedly higher like AMZN with everyone calling tops and trying to short. Bleh.
I think this alibaba and media hype on calls is the kiss of death. They did this with MU.
I say dump it if you have profits but is this an EMC/VMW situation?
Or will this get retardedly higher like AMZN with everyone calling tops and trying to short. Bleh.
Respectfully disagree.
Of course there's bound to be some hype; after all this the largest internet ipo ever since google; the order book is now closed, was priced at the top end of the range; the US$1.5b ipo (thus valuing the company $8.8b in total) attracted $180b (!!) in international institutional orders, $58b in retail orders in HK and was 250x oversubscribed.
But this is not about hype; this is for real. Yes it's pricy (54x 2008 earnings before use of ipo funds), but your paying for the huge future growth (more than 100%), it's cashflow positive and enjoys 70% market share in a yet huge and untapped market. The next competitor has 8% share...then you've got the 4 other subsidiaries of the alibaba group - the online auction - which has 85% of the market share (it previously took half of ebay china's market share in 3 months. ebay was forced to abandon)will be going public too. And yahoo owns 39% of this whole group. So consider that value.
So i don't consider alibaba hype. Then you have a beginnings of a turnaround in yahoo's search operations, and i think the stock has now become compelling. Althought the stock has done very well in the past month, it's still trading some 21% less than where it was almost 2 years ago, whereas for instance google for the same period is up 63%. Yahoo has awoken...and that's why one guy/insitution on friday bought i think over $8m worth of jan 40 calls in one sweep.....
Of course there's bound to be some hype; after all this the largest internet ipo ever since google; the order book is now closed, was priced at the top end of the range; the US$1.5b ipo (thus valuing the company $8.8b in total) attracted $180b (!!) in international institutional orders, $58b in retail orders in HK and was 250x oversubscribed.
But this is not about hype; this is for real. Yes it's pricy (54x 2008 earnings before use of ipo funds), but your paying for the huge future growth (more than 100%), it's cashflow positive and enjoys 70% market share in a yet huge and untapped market. The next competitor has 8% share...then you've got the 4 other subsidiaries of the alibaba group - the online auction - which has 85% of the market share (it previously took half of ebay china's market share in 3 months. ebay was forced to abandon)will be going public too. And yahoo owns 39% of this whole group. So consider that value.
So i don't consider alibaba hype. Then you have a beginnings of a turnaround in yahoo's search operations, and i think the stock has now become compelling. Althought the stock has done very well in the past month, it's still trading some 21% less than where it was almost 2 years ago, whereas for instance google for the same period is up 63%. Yahoo has awoken...and that's why one guy/insitution on friday bought i think over $8m worth of jan 40 calls in one sweep.....
Quote from dmt_2:
Respectfully disagree.
So i don't consider alibaba hype. Then you have a beginnings of a turnaround in yahoo's search operations, and i think the stock has now become compelling. Althought the stock has done very well in the past month, it's still trading some 21% less than where it was almost 2 years ago, whereas for instance google for the same period is up 63%. Yahoo has awoken...and that's why one guy/insitution on friday bought i think over $8m worth of jan 40 calls in one sweep.....
That was not a straight OTM call purchase. Its a backspread. Institutional type trading.
Im not going to comment on the options trade because I'm not an options expert like so many ETers are.
But, I can offer a view of yhoo that may help to explain why some BIG money has been moving in.
Lots of people complain about yhoo's PE and say is is too high. PEs are almost worthless nowdays. it is easier then ever to manipulate earnings....just ask any cfo, bean counter or finance person you know....they will confirm that PE is one of the most useless metrics out there. for example, when a co. is considering acquiring another co. they don't even look at the PE. the only people that think PEs are essential are retail investors like you. The problem is, one has to actually spend time reading the balance sheet and income statment, and i bet most people don't bother.
When a private equity firm or another public co. is looking to buy something, they don't look at PE, they look at FCF. Free Cash Flow. FCF is the true measure of a company's viability. and then to truly understand the value of any co. you need to also look at its assets.
And that is where yhoo mgmnt fell downâ¦...or was too conservative...they did a poor job of showing the true value of the co. they only listed 1M as the worth for the alibaba investment and the other big asian investments combined.
FCF is essential in understanding what is happening here.
FCF is the cash that the business generates, after capital expenditures or growing its asset base, to allow the company to develop new products, grow, pay debt or dividends etc. This is real cash, not manipulated accounting profits on paper. During the .com days, those companies had no fcf. Result: bankruptcy and no longer going concerns.
We need to take the market cap and remove from it the economic assets, then add back debt, to get to what yahoo operations is worth (or its enterprise value).
Assets as of 9/30/07:
Cash and equivalents: 1.53b
10% share in Gmkt (on nasdq): 0.128b
34% share in Yhoo Japan (on Tokyo exch): 9.7b
39%+10% in subsid: Alibaba: 10b (assumes no increase at ipo. Conservative)
Other investments at cost: 1b
Add debt: 0.750b
Total Adjustments = 21.6b
So:
Market cap today (stock 30.64): 44.1b
Less above adjustment: 21.6b
Adjusted market cap (or enterprise value) = 22.5b = what yahoo operations is valued at. And it would be quite a bit lower if i made the alibaba more realistically valued.
9/30 YTD fcf was 1.3b
So Yahoo's adjusted market cap is 17x free cash flows. Very very low by the industry standards.
Now, lets compare it to google.
Google market cap: 213b
Adj market cap: 196.2b
YTD fcf at 9/30: 1.93b
So Google's adjusted market cap is 102x free cash flows!! Absolutely insane.
Or in other words yahoo generates 63% of google's free cash flow, yet google is valued 5x more than yahoo. If we applied google's fcf multiple, yahoo's stock price would be $147.8 today... a nice thought (sorry stck_trd3r but you are very wrong on saying yhoo is going 8)
Now if after the above explanation, you still talk about yahoo's PE ratio, or any other valuation to show how expensive it is, I don't hate you, but shoot yourself in the foot please. The media guys, like cramer, aren't dumb. They just have ulterior motives. Numbers don't lie if you know where to find them and read them....
But, I can offer a view of yhoo that may help to explain why some BIG money has been moving in.
Lots of people complain about yhoo's PE and say is is too high. PEs are almost worthless nowdays. it is easier then ever to manipulate earnings....just ask any cfo, bean counter or finance person you know....they will confirm that PE is one of the most useless metrics out there. for example, when a co. is considering acquiring another co. they don't even look at the PE. the only people that think PEs are essential are retail investors like you. The problem is, one has to actually spend time reading the balance sheet and income statment, and i bet most people don't bother.
When a private equity firm or another public co. is looking to buy something, they don't look at PE, they look at FCF. Free Cash Flow. FCF is the true measure of a company's viability. and then to truly understand the value of any co. you need to also look at its assets.
And that is where yhoo mgmnt fell downâ¦...or was too conservative...they did a poor job of showing the true value of the co. they only listed 1M as the worth for the alibaba investment and the other big asian investments combined.
FCF is essential in understanding what is happening here.
FCF is the cash that the business generates, after capital expenditures or growing its asset base, to allow the company to develop new products, grow, pay debt or dividends etc. This is real cash, not manipulated accounting profits on paper. During the .com days, those companies had no fcf. Result: bankruptcy and no longer going concerns.
We need to take the market cap and remove from it the economic assets, then add back debt, to get to what yahoo operations is worth (or its enterprise value).
Assets as of 9/30/07:
Cash and equivalents: 1.53b
10% share in Gmkt (on nasdq): 0.128b
34% share in Yhoo Japan (on Tokyo exch): 9.7b
39%+10% in subsid: Alibaba: 10b (assumes no increase at ipo. Conservative)
Other investments at cost: 1b
Add debt: 0.750b
Total Adjustments = 21.6b
So:
Market cap today (stock 30.64): 44.1b
Less above adjustment: 21.6b
Adjusted market cap (or enterprise value) = 22.5b = what yahoo operations is valued at. And it would be quite a bit lower if i made the alibaba more realistically valued.
9/30 YTD fcf was 1.3b
So Yahoo's adjusted market cap is 17x free cash flows. Very very low by the industry standards.
Now, lets compare it to google.
Google market cap: 213b
Adj market cap: 196.2b
YTD fcf at 9/30: 1.93b
So Google's adjusted market cap is 102x free cash flows!! Absolutely insane.
Or in other words yahoo generates 63% of google's free cash flow, yet google is valued 5x more than yahoo. If we applied google's fcf multiple, yahoo's stock price would be $147.8 today... a nice thought (sorry stck_trd3r but you are very wrong on saying yhoo is going 8)
Now if after the above explanation, you still talk about yahoo's PE ratio, or any other valuation to show how expensive it is, I don't hate you, but shoot yourself in the foot please. The media guys, like cramer, aren't dumb. They just have ulterior motives. Numbers don't lie if you know where to find them and read them....