Yahoo! Inc. (NASDAQ:YHOO) is already benefiting from activist hedge fund manager Jeff Smith’s campaign. Reports that Yahoo! Inc. (NASDAQ:YHOO) might be planning to pursue tax shields for its Asian assets has prompted FBR Capital Markets to upgrade the stock to an ‘outperform’ with a share price target of $50. One of the main assets that Yahoo is destined to shield are its stakes in Alibaba Group Holding Ltd (NYSE:BABA) that are believed to be valuable than the other assets.
FBR Capital remains optimistic that Yahoo will implement a structure that could impact the company both on the tax and economic front. The remaining stakes in Alibaba under Lock-up, according to the research firm are to be a major determinant in the company pursuing structures such as spin-split, cash-rich split or raising of debt against other remaining Asian assets. The giant search engine company may also initiate an action in advance that should shield Alibaba Group Holding Ltd (NYSE:BABA)’s remaining stakes from incurring exorbitant taxes.
The research firm also remains confident that new initiatives on social, mobile, and native aspects should be a game changer in terms of returns going forward. The research firm argues that for Yahoo! Inc. (NASDAQ:YHOO) to grow at the rate it desires, it will have to devise a formula to offset a slide of about $60 million on the ad segment business.
Yahoo! Inc. (NASDAQ:YHOO) continues to attain substantial growth margins, mobile revenues having surpassed the $200 million mark in the third quarter and certain to clock the $1.2 billion mark by the end of the year. The company also remains focused on returning value to shareholders having announced that it will be returning up to $7.7 billion through buybacks.
The spending spree under CEO, Marissa Mayer, tenure that currently stands at $1.6 billion continues to be a point of debate for many investors especially on the fact that they have not generated the expected returns. During the third quarter, Yahoo! Inc. (NASDAQ:YHOO) successfully reduced its share count by 24% at an average repurchase price of $26.37.
John Thaler‘s JAT Capital Management holds 8.8 million shares of Yahoo! Inc. (NASDAQ:YHOO) at the end of second quarter.