Analyst Predicts Big Gains For Yahoo Post-Microsoft Deal

Tops existing consensus by 29.6 percent

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Maybe Yahoo’s deal with Microsoft was a smart move, after all.  RBC analyst Ross Sandler has stepped forward to say that it’ll have a positive financial effect on Carol Bartz’s company, boosting certain figures significantly above forecasted levels. 

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According to Henry Blodget, Sandler wrote in a note to RBC clients, "We have taken an extensive look at Yahoo’s cost base and believe that the company could expand EBITDA margins from current mid-30%’s to 49% over the next several years, well above the consensus margin assumption of 37.8% in 2011."

In fact, if Yahoo pulls off Sandler’s improvement, it’ll be have beaten that consensus margin assumption by a whopping 29.6 percent.  (And EBITDA is an acronym that stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, in case you’re wondering.)

So here’s the number one reason why Sandler has so much faith in Yahoo: he thinks "the shift of search-related costs to MSFT per the partnership terms should allow the YHOO search EBITDA margin to drift to 85% (by 2011/2012)."

Anyway, Sandler gave Yahoo’s shares, which are currently trading at $14.78 each, a price target of $19.

Analyst Predicts Big Gains For Yahoo Post-Microsoft Deal
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  • yanghoooooooooo

    RBC is a schill obviously the market hates the deal. Douggy Kass says msft will buy yahoo in 2010 for 5 a share. Short this one it has a 40 pe and no no no no no buyout premium

  • donrich

    I don’t think yahoo and mcsft can pull down google with bing.
    Is thru that mcsft run the internet with bing by pulling people to bing thro browser, well that is a could development!
    Well the fact is that there can do alot with yahoo traffic but the truth is that google can do much more with webmaster like us thru adsense.
    Mcsft and yahoo people like me to do that.
    With google multi languages i think google is the oracle.
    So mcsft need the miracle to over thro the oracle!

  • http://tinycar.org tinycar

    Yahoo started with a directory then went to search to be the top. Yeah, yahoo mail is my favorite as well but now Mcrsft “help” Y to get rid of search engine to make the price/share down after all they buy off at low cost in 1010. It’s possible, isn’t?

  • Noel Teno

    Microsoft and Bing search engins are really useless.

    How on earth can anyone give them life expectancy
    is beyond me.

    Without any daught Yahoo is the very best search engin on the web.

    Yahoo just needs some extras to let google feel the pinch and take first place in the race.

    Extras where people are involved or services that really meaningfull .

    Some very carefull thinkinfg needs to be done to brake the paradign that is holding yahoo back.

    Very possibly the answers are very very simple.

    My very best to you all.


  • http://chiromatrix.com Chiropractic Websites Rock

    Google is so far ahead of the game. At best, Microsoft and Yahoo will be competitive to Google in 5 years.

    Google is integrated into the psyche of web searchers. Breaking that deep rooted connection between the words “search” and “Google” will take much longer than anyone expects. Furthermore Google is making significant strides in connecting other aspects of the web. Like “Maps” and “phone” and “OS” and “browser”

    Additionally, due to the wide held belief in both companies that Google is number 1 and Yahoo is number 2, the level of talent attracted by Yahoo is simply lower. Turning that perception around for Yahoo employees is just as important.

    Quite frankly I’d be more likely to sell yahoo short at this point.

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