YHOO

Valuentum Mosaic Exclusive: Talks Between Yahoo and eBay Probable

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Let’s put it this way: the combined eBay and PayPal entity presently listed under the ticker symbol eBay (EBAY) is cheap. The combined company is trading in the mid-$50s with a market capitalization of ~$69 billion at present, and we value its shares in the mid-$70s (a ~$90+ billion valuation). We’re not the only one, in case you think that, despite everything we seem to get correct, we’re off our rockers with this valuation. Stifel, for example, recently labeled $75 per share as an upside case for the company. eBay remains a holding in the Best Ideas portfolio, and the equity markets are simply getting the company’s valuation wrong, in our view. It is one of the few true bargains … Read more

Alibaba Still Has Upside to $125+ Per Share

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Warren Buffett (BRK.A, BRK.B) hasn’t bought an initial public offering (IPO) in fifty years. The Oracle of Omaha has often said that IPOs are almost always bad investments, which may often be the case. Such a view is great guidance for new and inexperienced investors, but the key word of emphasis in his view is ‘almost.’ Some IPOs are, in fact, worth looking into. Remember: an asset in any form can be mispriced, whether it is a house, rental car, piece of equipment, secondary stock sale, and yes, even an IPO. An asset’s value in any and all cases will be the present value of risk-adjusted future free cash flows after accounting for the current balance sheet net cash/debt position … Read more

Starboard and Yahoo

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The Marissa Mayer hype has been exciting and refreshing. But with Mayer and the executive suite having done little to turn around the core operations of Yahoo (YHOO), and more recently snubbing talks about tying the knot with AOL (AOL), the time may be ripe for a shakeup. Activist investor and investment management firm Starboard Value thinks so. In an open letter to Mayer and the board of directors of Yahoo, Starboard Value announced that it has acquired a significant ownership stake in the beleaguered, and once-relevant, Internet portal.  Starboard outlined a case for Yahoo to monetize the company’s non-core minority equity investments (Alibaba, Yahoo Japan) in a tax-efficient manner and tie-up with AOL, which itself has been on the … Read more

Google’s Net Cash Position Grows to $56 Billion

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Google (GOOG, GOOGL) is trading just shy of a market capitalization of $387 billion at the time of this writing, one of the largest US-traded stocks out there. For a company this big to grow revenue 22% in its second quarter, which it reported Thursday, is quite the feat. The firm’s non-GAAP operating income came in at $5.14 billion, showcasing a 32% margin, up from $4.21 billion, matching the pace of growth on the top line. Non-GAAP earnings-per-share in the second quarter of 2014 was $6.08, compared to $4.96 in the second quarter of 2013, representing year-over-year growth just slightly higher than the 22% mark. Google is simply executing fantastically, and we continue to like shares in the Best Ideas … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Assessing Materiality of 5 Relatively Poor Incremental Data Points from eBay

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eBay (EBAY) has one of the strongest business models on the market today. The firm uniquely benefits from a network effect in its auction business and a secular trend toward consumer online consumption in its payments business, PayPal. Recent same-store sales performance has also been solid, albeit slowing, in recent periods. According to ChannelAdvisor same-store sales growth at eBay came in at 11.5% in May, down from 14% in April. eBay retains a vibrant Economic Castle. Before we start walking through the five relatively poor incremental data points from eBay, we need to make a couple things clear. First, we hold eBay in the portfolio of our Best Ideas Newsletter, and we do not expect to make any changes to … Read more