HH Yahoo Is Not An Attractive Pick For Value Investors

Yahoo! (NASDAQ:YHOO) is disappointing its shareholders. Recently, the company decided not to spinoff its Alibaba (NYSE:BABA) stake. Some key investors promise a proxy fight if CEO Marissa Mayer does not make more successful decisions.

Instead, Yahoo! has reviewed a spinoff of its core Internet business. This will leave two companies: the first (core) will include Yahoo!’s traditional search, email, and Tumblr social media service, along with sites like Yahoo Finance; the second will be a shell company with a 15% stake in Alibaba.

With uncertainty ahead, we are very hesitant to recommend Yahoo! as a value pick.

Poor Results (And Costs) Pile Up

Yahoo missed last quarter’s earnings projections, and the company cut its fourth quarter revenue outlook from the $1.3 billion in expected sales to a range of $1.16 billion to $1.2 billion.

Gross search revenue did rise nearly two percent from last year to cut its fourth quarter revenue outlook.

Yahoo’s traffic acquisition costs (what Yahoo! sends to its partner websites) quadrupled to $223 million in the third quarter, up from $54 million from the third quarter of the previous year.

Stock Tumbles

Since Dec. 3, 2014, Yahoo’s stock price fell from a high of $50.28 per share to $35 per share as of late 2015.

(Nasdaq.com)

The company’s buyback program spiraled, when Mayer took over, to its current level of $35 per share.

Conclusion: Not a Value, Despite the Dip

Mayer, the former Google (NASDAQ:GOOGL) executive, raised hopes for many Yahoo shareholders when she was named CEO of Yahoo in 2012. However, we wonder if she has done enough in her post. Many are calling Yahoo!’s trajectory vague. It’s clear she must cut costs soon in order to remain competitive.

Next to the giant’s competitors in search, news, and networks, Yahoo! is clearly losing out.