This is exactly what I knew was going to happen. I can tell you that Yahoo shareholders are likely pissed and I wouldn’t be surprised if they get hostile over this. Fans of yahoo of course think this is great but they don’t realize the underlying problems the company is facing. Internet search is no longer the hot ticket when it comes to dominating the market. Take Google for example. They aren’t focused solely on search anymore and have embraced many of the web 2.0 technologies like blogging, third party APIs and soon, the mobile phone market.
Google, unlike yahoo keeps reinventing itself by keeping up with what new devices are in demand and how people are using them. I’m not talking about Google today though…I want to talk about how to make some money on Yahoo now.
Though I believe the company is in dire straits, this 15% plummet in price is good for contrarian style investors because it gives you an in.
Yahoo’s growth is around 19% and trades at 32 times earnings which is too low. It should be trading at38 times earnings giving you a price of about $29 where it was fair value before the Microsoft pullout.
That means you can buy it here 5 points down and probably make some money in the next couple weeks as it shakes out the unbelievers. I’d like to see it come back just a little more before buying it but $24 is a good entry and you can buy more on a dip. I’d look for a sell price of $29-$30 within 18 months.
Find out what I am doing right now by following me on Twitter! If you like this post then please consider subscribing to my full feed RSS. You can also subscribe by Email and have new posts sent directly to your inbox.
