Yahoo! Inc. (YHOO, Financial), one of the largest technology companies in the world, has been facing the heat from all sides as its share prices have seen a decreasing trend ever since the new year started. While a drop in share prices by close to 6% in the first 15 days does seem a bit unusual, there is no reason to panic as the time period is too short to judge a company, especially a big and diverse one like Yahoo!. Currently the share price of Yahoo! is $46.47 per share. The dip in share prices for Jan 2015 is shown below:
Should this spell trouble for Yahoo! shareholders? Definitely not, as it is just about 20 days since 2015 began. As in the case of every other company, speculations are going on in full throttle about Yahoo!, too, that the company’s unnecessary and unprofitable acquisitions have paved the way for this crash. People have started to point fingers against Yahoo! CEO Marissa Mayer for her strategies, forgetting that it was under her leadership that Yahoo! grew immensely not so long ago. Some reasons as to why you should not write off Yahoo! are explained below:
Perfectly tapped the mobile market
Mayer and her team have aimed to earn $700 million revenue from the opportunities in the mobile sector alone for the full year of 2014. For Q3 2014, Yahoo! had reported search and display revenue to the tune of $200 million from mobile apps and other mobile devices. These actual earnings are pretty reasonable when compared to the full year target. Yahoo! is slowly bouncing back from the losses it suffered due to offbeat advertising and the improper search deal application that it had signed with Microsoft (MSFT, Financial).
Yahoo! is indeed a winner in the mobile app market. One of its most successful projects is the “Yahoo Weather.” This app has been a huge hit both on the iOS and the Android platforms. Most of the people who use smartphones that run on these operating systems have given excellent ratings for this app. Other apps that are commonly used by smartphone users are Yahoo! Sports, Yahoo! Finance etc. These apps have a loyal customer base and for Q3 2014, Yahoo! had close to 550 million users. This number had reported an increase of 17% from 2013. This is one area that will put Yahoo! on a strong path. Losses from other sectors will be offset from the wins in this mobile app category.
Investments in the digital entertainment and programming industry
Mayer and her team are doing all they can to bring back Yahoo! on track. So the company is investing heavily in the digital entertainment, content and programming sector. As a first step to this initiative, the hit show “Community” is being introduced for the sixth season. The digital magazine industry, too, is an industry that Yahoo! will be venturing into in the near future. Proposals are on in full swing to launch fashion and lifestyle magazines like Yahoo! Tech, Yahoo! Health, Yahoo! Style and many more. The digital entertainment and programming sector is one that always welcomes new idea and encourages creativity to the core. Investing in this sector will prove profitable for Yahoo!, as one of the core competencies of the company is cutting-edge technology.
Stake in Alibaba
Yahoo! currently holds 24% of stake in the China based e-commerce giant, Alibaba (BABA, Financial). The power of Alibaba can be understood this way – its size is Amazon (AMZN, Financial), PayPal and eBay (EBAY, Financial) all rolled into one. For Yahoo!, this stake means investors get a minimum of $32.12 per share in terms of tangible book value. This association is expected to bring a marked turn to the company’s figures for 2015. The CEO and her able staff will be going the extra mile to get back the confidence of their shareholders. For the rumours that have been floating about Yahoo!’s miserable performance under Mayer, this chart is the perfect answer.
Conclusion
Since it is not even a month since 2015 started, the 6% share price drop should not be a reason for worry for shareholders of Yahoo! Incorporation’s stock. The short time period for which the prices have dropped should not be taken as the base for drawing any conclusion. Due to the above factors, it is expected that Yahoo! will bounce back strongly and become one of the most-respected stocks in the market through 2015.
