Jim Cramer’s Input on Yahoo
I found this over at thestreet.com and thought it was great insight on yahoo’s current situation and what to expect from its earnings tomorrow. Yahoo (YHOO) stock closed today at $24.18.
Yahoo! Could Be Yes
Using Yahoo! (YHOO – news – Cramer’s Take), which he owns for his charitable trust, Action Alerts PLUS, as an example, Cramer showed viewers how to determine a fair price in a stock that’s falling.
The first method is looking at the company’s earnings, he said. Yahoo! reports Tuesday, and its earnings are a “travesty,” Cramer said.
While people are expecting it to deliver 47 cents this year and 65 cents next year, he believes that these estimates are “too high” and that Yahoo! might even cut guidance for next year.
“It’s a $12 stock masquerading as a $24 stock,” Cramer said. “When it reports tomorrow it will be slaughtered.”
However, there might be a bottom if it reports “terrible” earnings, he said. “If it cuts earnings estimates down to 25%, it has a shot to beat them.”
Also, there’s a chance that Yahoo!’s management is the issue, Cramer said. There were high expectations for its chief executive, but he’s missed several opportunities to grow the company.
Yahoo! as a takeover target is the most interesting idea, he added. At this point Cramer believes that there are four buyers that would pay at least $30 a share for it: Microsoft (MSFT – news – Cramer’s Take), Viacom (VIA – news – Cramer’s Take), Comcast (CMCSA – news – Cramer’s Take) and AT&T (T – news – Cramer’s Take).Based on the analysis, he recommended buying Yahoo! after it reports earnings.
