He sees Yahoo’s stock going to $22 if they continue with “business as usual” and don’t find a partner. This is 45% likely, he says. He gives a 40% chance that Yahoo pursues a major strategic alternative such as a Google outsourcing, partnership with AOL or MySpace, stock buyback, sale of Asian assets, etc. A Google outsourcing deal brings $1 billion of more in increased cash flow and adds $6 to Yahoo’s stock, he says.
He’s also saying that an eventual combination with Microsoft is still 15% likely. Microsoft may come back to the table, he says, because “there is No Plan B to succeed on the Internet” (I agree). The weighted average is a $26 stock price. Yahoo is currently (noon PST) trading at $24, down about 15% from Friday. It started the day down 20%.
Mahaney’s full chart is below. I’ve also added his top level analysis of a Google outsourcing deal. Search revenue would grow from $1.6 billion to $2.7 billion (moving from 4 cents a click to 7 cents).
Compare Mahaney’s $26 price guess to the Fred Wilson’s informal crowdsourcing approach, which came in at $22. If the markets stay steady, the real price is nearly exactly the mid point between the two.