| 2016-10-18 10:40:46|
YHOO, VZ 10:40 10/18 10/18/16
Needham cuts Yahoo to hold on acquisition, valuation worries
Research firm Needham downgraded Yahoo (YHOO) to Hold from Buy based on valuation and its concern that Verizon (VZ) could decide to renege on its commitment to buy the troubled Internet giant. DEAL AT RISK: On September 22, Yahoo announced that the personal information of about 500M of its users had been stolen, noted Needham analyst Laura Martin. Last week, the general counsel of Verizon, which agreed to buy Yahoo in July, said that it's "reasonable" to believe that Verizon could seek to renegotiate, or walk away from, the deal in the wake of the data breach. Martin is concerned that Verizon could renege on the deal or demand that the acquisition price be lowered. VALUATION: Yahoo's stock has exceeded Martin's previous target price of $40 per share, the analyst noted. EARNINGS: Yahoo is scheduled to report its earnings after the market closes today, October 18. However, the company said that it would not host a conference call tonight due to the Verizon deal. WHAT'S NOTABLE: Speaking earlier this month at the Internet Association's Virtuous Cycle conference, Verizon CEO Lowell McAdam downplayed a New York Post article alleging it was seeking a $1B discount in its deal for Yahoo following cybersecurity breaches at the company, reported CNBC. "That is just total speculation -- we still see a real value to the asset there. But in fairness, we're still understanding what was going on, to define whether it's a material impact to the business or not. But the industrial logic of doing this merger still makes a lot of sense... I'm hoping we can get through all this stuff and get to the close," McAdam was quoted as having said. PRICE ACTION: In morning trading, Yahoo climbed about 1.5% to $42.45. Since July 25, the date on which Verizon and Yahoo jointly announced a definitive agreement under which Verizon will acquire Yahoo's operating business for approximately $4.83B in cash, Yahoo shares have risen 7.75%.