With Yahoo! Inc. (NASDAQ:YHOO) entertaining bids for the sale of its core, SunTrust highlights the company’s less visible assets and how they will play into the sale
Yahoo! Inc. (NASDAQ:YHOO) was planning to spin off its core into a new entity but pressure from activist investors has led Yahoo’s board to invite bids to interested buyers. The company’s assets have been valued in the range of $6-8 billion but a number of underappreciated assets could help them reach the $10 billion price tag it is looking for.
Bob Peck, analyst at SunTrust Robinson Humphrey, in recent coverage of Yahoo maintained a Buy rating on the stock and added to its price target from $40 to $44. Peck has highlighted three assets of the company that in the analyst’s opinion entitle it to a higher valuation than the $6-8 billion figure that Yahoo has reported for its assets. First is the royalties the company calculates from its spinoff Yahoo! Japan. The Yahoo! Japan revenue stream is highly lucrative and currently represents 30% of the company’s total advertising revenue in 2016. Concerns regarding the transferability of the cash are overblown and misplaced which is apparent from the contract between Yahoo and Yahoo! Japan.
Peck has also called for a revaluation of Yahoo’s intellectual property. The company has close to six thousand patents to its name which the analysts values in the range of $1-3 billion. Since most of these patents are publicly available they could prove valuable assets for company’s considering acquiring Yahoo’s core. The first category of assets highlighted by the analyst was the company’s real estate holdings. Yahoo owns approximately 1 million square feet in real estate and buildings which the SunTrust analyst has estimated to be worth close to $1 billion. All in all, these assets add anywhere from $2-4 billion to Yahoo’s valuation easily making the company worth the $10 billion paycheck they’re asking for.