Buying YHOO

Mark Pincus is thinking of going long Yahoo!  No wait, he bought it yesterday.

The last trade he blogged was his short eBay/long Amazon trade which netted him a sweet 25% gain in a month or two, while the market was falling apart.

I like to pay attention to Mark’s picks.  He’s what you call a money maker.

His timing on Yahoo! couldn’t be better. Yahoo!’s stock is off 20% on the news that their new search platform, code named Panama, is going to be late by as much as six months.

Yahoo!’s market cap is down to $35bn.

It is hitting its numbers and is on plan to earn $2bn of ebitda this year.

So you can buy Yahoo! at 19 times trailing EBITDA and about 17x this calendar year's EBITDA.

That’s a pretty compelling price for one of the few firms that is riding the Internet wave instead of getting trashed by it. The current year EBITDA multiple is a bit lower than that of News Corp.

Sure they have issues in search. They are a distant second to Google and don’t monetize search nearly as well as Google (which is where Panama comes in). But according to Comscore, they are holding their share while everyone else is losing share to Google.

And when it comes to banners, which are the hot growth sector right now, Yahoo! is king.

So I am with Mark. Now’s a good time to buy Yahoo!. I think I’ll join him on this trade since I blew it and failed to do that on the eBay/Amazon trade.

Comments

[howard lindzon]

For the pro's selling puts because the premiums are high is a great way to enter this trade if you like the stock long -term.

Keep your capital free for late summer early fall

[marc]

You'd also have to back out the $1.8 bn in net cash, and the value of the Yahoo Japan stake, which makes this an even more compelling buy.

[David G]

Now I know the real reason you are buying Y!

Yahoo Cracks the DRM Barrier - http://tinyurl.com/gzbyn

;-)

[E Dorsey]

Options on Yahoo have been priced at a volatility not seen since 2003 anticipating as big a move in the stock (22%), either way, as much as last quarter. This suggests more of a move to the downside. Investors, depending on their opinion on the stock, can buy calls or sell straddles and strangles to increase their alpha or sell the stock and sell the straddles and strangles

[EDorsey]

I would not value a technology company on TRAILING Ebitda margins but rather on FORWARD 2007 Ebitda margins. NewsCorp is very well-positioned with its recent acquisition of mySpace and its revenue-sharing agreement with GOOG. News Corp will likely go back to GOOG and extend its agreement to include YouTube (they attempted to buy it but were told that the company was not for sale).

[EDorsey]

The desk is hearing that Goldman is holding a conference call on the internet and may be talking about Comcast or AT&T buying Yahoo. Take a look at its volume.

[EDorsey]

Multichannel News magazine:

Buying YouTube doesn’t mean that GOOG stays at the top of the fast-moving heap of competitors in online video. Lurking in the background, for instance, is “The Venice Project,” an infant venture promising radical new ways of combining social networks and television on the internet, using peer-to-peer computer technology. The founders: Janus Friis and Niklas Zennstrom, who created the music-sharing service KaZaa and the almost-free internet phone service Skype – which they sold to Ebay last year for $2.6 bn.”