Wednesday, December 06, 2006

Taking A Shot

Well, I'm taking a shot with Yahoo! (YHOO). Picked up shares at an average price of 27.29 in the pre-market (bought shares as low as 27.10 and as high as 27.38). I would have thought that the shake-up announced last night would have been viewed positively. Basically, I'm betting that it my initial reaction is the right one and the minor sell-off this morning will be short-lived. The position isn't all that small, but I'm going to be watching it like a hawk and prepared to exit as early as today.


gaamblor said...

I agree with you in theory that this move should have been up not down...but the stock is still so expensive.

I can't see any upside in the trade unless if bounces tomorrow on some good analyst comments about the move

Brute Force said...

Ya, well so far so bad. I'll hold this for a little bit longer... definitely just a trade though.

I disagree, however, that Yahoo is really expensive. It's not cheap, but I don't think its current valuation is that far out of wack. That said, it's really in a show-me position though, and a lot of its value is tied to the success of key projects (Panama, etc), and estimating success isn't all that easy.

gaamblor said...

YHOO is at 45 times 2007 eps google is at 37

YHOO is at 32 times 2008 google is at 28

Do you really think Yahoo is more likely to meet and exceed these targets when google has been crushing them consistently.

Brute Force said...

Considering that it trades at a forward EBITDA multiple of about 12-14x, I think the share price has been discounted a fair bit.

Now, GOOG is growing faster, no doubt. But, I do believe that proper monetization of YHOO's search will lead to not-to-be dismissed earnings potential. Again, it hasn't completely proven it can do so, so there's risk there. Its earnings growth might not be that of GOOG's, but it's not as bad as the street believes, imo.