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Yahoo has arrived; tallies 18-month shares high as Mayer takes the lead

Yahoo Inc has hit its first 18-month high shares record as more and more investors are warming up to the new CEO, Marissa Mayer.

Even without any concrete evidence of a complete turnaround for the company yet, Ms Mayer seems to be gaining a lot of respect and trust from investors. She’s keen though to  say that steering Yahoo into a favorable direction will be a difficult one.

Tiger Global Management and Greenlight Capital Management recently revealed having large stakes in the company, most of them acquired during the third quarter.

“Money managers are staring to want to own this name again,” Colin Gillis, an analyst from BGC Partners, said.

“For the amount of traffic they have, and the assets they have, they should be able to squeeze some value out of that,” he added.  He also believes that Mayer can transform the ailing tech company into another vibrant and strong internet powerhouse.

Adam Seessel of Gravity Capital Management said that the recruitment of Mayer of Google’s top heads including the current Chief Operating Officer Henrique de Castro, helped in polishing the image of Yahoo.

“What the market is seeing is not (financial) numbers so much as they’re seeing people voting with their feet, people moving from Google to Yahoo,” commented Seessel. His company has also invested in Yahoo shares.

“All these people from Google wouldn’t be following her if they didn’t think that she didn’t have some good cards to play,” he added.

The company’s shares finished during Monday’s trading day up 2.8 percent or &18.36. The last time Yahoo recorded &18.30 was in May of 2011.

Yahoo is one of the most popular websites in the world, with its vaunted 700 million unique monthly visitors. Despite the high traffic, the company had seen better days as its revenue began to dry up as Google and Facebook takes the lead in the Internet sphere. The industry-wide change on how online advertising is conducted, featuring compressed prices for online display ads, which are key to Yahoo’s business, did not help either.

Other than that, Yahoo also encountered some top management issues that resulted to CEO Carol Bartz being fired on the phone and CEO Scott Thompson’s resignation a few months after taking the position due to an  academic-related scandal.  Mayer took over the vacant position in July 2012.

Last month, she disclosed to investors via a conference call that her main goal is to make Yahoo’s online products smartphone friendly.

Analysts and investors did not entertain last weekend’s report by The Telegraph that Mayer’s Yahoo is in discussions with Facebook about a possible search deal. Facebook denied the report afterwards.

“People expect a better search experience on Facebook. We are working on improvements to better meet those expectations but are not in talks to enter into a new search partnership,” an official announcement from Facebook said last Monday.

Analysts expect that search is one of the important areas that Mayer will exploit to turn the fortune of Yahoo around.  The 2010 deal that CEO Bartz initiated with Microsoft to outsource back-end technology of Yahoo’s search to Microsoft Corp did not produce any expected increase in Yahoo’s ad revenue.

Analyst Brett Harriss of Gabelli & Company believes that Yahoo’s search can make a big comeback. He said that Yahoo’s share should be valued at $26 a share basing on six-times  multiple earnings before interest, depreciation, taxes, and amortization.

Harris further said: “It was a disaster for a year and a half. Everybody hated the board, you had a while of transition where you went through three or four CEOs quickly.”

Currently, with Ms Mayer at the helm, he said that the company had finally a CEO “that investors can believe in.”

source: reuters