Yahoo! Inc. (NASDAQ:YHOO) shares were recently shooting up 1% after Goldman Sachs included the company to its Conviction list.
Heath Terry, an analyst raised his price target on a note by $2 to $24. He mentioned that the company is taking smart capital allocation moves that make its balance sheet assets and core businesses more valuable than the value it is receiving from the market. Also, there is still a lot of miles to traverse in Yahoo’s share purchase plan that has been received warmly by the Street.
Terry has emphasized on how the stock price could increase as high as $35 as the company follows through the divestitures of Yahoo Japan and its remaining Alibaba stake.
In May, Yahoo had mentioned that it would reduce its then stake of 40% stake in Alibaba in phases. The two companies had agreed to reorganize their terms.
Yahoo is returning 85% of the proceeds to its investors from its sale of $7.6 billion. After fees and taxes, Yahoo is expecting to collect $4.3 billion in cash. It will return $3 billion of that to investors.
Terry said that Goldman Sachs believes that continued growth at Alibaba can mean well for Yahoo. In September of 2011, Silver Lake Partners had introduced a $1.6 billion tender proposal for Alibaba stocks that valued the company at more than $32 billion. Alibaba has reported that the latest round of funding that it raised to sponsor the Yahoo stake buyback is worth $40 billion. Goldman Sachs also believes that there is more upside prospective, considering increments in the value of Alibaba stake.
Yahoo has employed Marissa Mayer, former executive of Google in another bid to make a comeback to the growth mode. The site gets a number of visitors, however, the figures are still struggling with those of Google and Facebook for online ad sales.