The Yahoo Mess

I have to confess that I can’t make any sense of Yahoo (YHOO) and its share price. I’ve said for some time that the stock should be around $15. Frankly, I consider that to be an optimistic price. Still, Microsoft thought it was wise to offer $33 for the company, and Yahoo thought it was wiser still, to reject that offer. And then later accept it after it had been withdrawn.
Yesterday, Yahoo reported that its quarterly earnings-per-share fell from 11 cents last year to nine cents this year, two cents below the Street. This was the ninth time in the past ten quarters that YHOO’s earnings have decline. Sales rose just 5.9% to $1.8 billion. I just don’t get it. How can a company with such mediocre performance command such a high share price?
This company has gone from earnings 58 cents a share in 2005, to 52 cents, to 47 cents, and probably another 47 cents this year. Yet, YHOO is over $21 a share. Nicholas Financial (NICK), on the other hand, went from $1.13 to 94 cents, and it’s under $5 a share.

Posted by on July 23rd, 2008 at 12:58 pm


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