Marissa Mayer Explains Why Yahoo Is Undervalued

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On stage today at TechCrunch Disrupt New York, Yahoo CEO Marissa Mayer pushed against the narrative that Yahoo is worth nothing. The company has a market capitalization in the tens of billions, but it’s been pointed out that if you add up the value of its stakes in Yahoo Japan and Alibaba, the company could be valued at something approaching zero.

Asked by TechCrunch curmudgeon-emeritus Michael Arrington if she agreed with that analysis, Mayer, unsurprisingly, did not.

Stating that the numbers are for investors to sort through, she indicated optimism in the core of Yahoo, and argued that Yahoo is undervalued. Is that reasonable? Perhaps.

Yahoo’s stake in Alibaba is worth around $26 billion at the moment. That figure could go up depending on how Alibaba prices its IPO. Yahoo’s Yahoo Japan stake is worth around $9 billion. Yahoo’s total market cap is $34.4 billion today. (Of course, Yahoo will have a tax bill if it sells those shares. So, the actual value of the investments should be mentally slimmed by that margin.)

In her early remarks, Mayer spoke warmly of the company she helms, stating that the company is now “executing” better, and is operating more strongly than in the past. She said that she was surprised at how many talented people were on staff when she arrived.

The lingering question with her strategy as CEO to pursue mobile doggedly will produce financial momentum, is starting to become answered in the affirmative: Yahoo’s last quarter’s earnings showed a revenue incline — ex-TAC revenue, of course — on a year-over-year basis, partially on the back of 430 million mobile monthly active users.

One time event or start of a trend we can’t be sure yet as that history hasn’t yet been written.

It’s fair to say that if Mayer is correct in her vision, and the ship is starting to turn, Yahoo could in fact be quite undervalued. It’s always odd for a company to be valued at less than its cash and equivalents position when its business is profitable, something that could occur if its market cap remains roughly flat and Alibaba picks up momentum once public.

Or put another way, it’s becoming harder to argue that the core parts of Yahoo are worthy of having negative market cap value.

Yahoo is down more than 6 percent in regular trading, joining a cadre of other tech stocks that have taken a beating today.

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