Do you really need to buy YAHOO stock now?

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May 12 2008
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Since Microsoft walked away from Yahoo, either deliberately or otherwise, many investors were arguing whether they should buy the stock in anticipation of another round of acquisition talk – by the same acquirer Microsoft Corp. (Nasdaq: MSFT, stock). The argument was pretty simple and easy – the bald-headed Balmer was playing hide and seek with Yahoo Inc. (Nasdaq: YHOO, stock) and it’s a matter of time before Microsoft launches another similar acquisition proposal, perhaps with a lower offer price.

The fact that Yahoo stock price didn’t tumble to the pre-acquisition price of $20 bucks a share shows that investors (and punters) are betting that there’re easy money to be made by holding to Yahoo stock. At least that’s the perception in keeping the Yahoo share price afloat. And the perceptions are Microsoft did not walk away for good and Yahoo successfully bought some time to prove that the company’s value is higher than $20, $25 and even $30 a share. Jerry Yang admitted he is still open to a deal with Microsoft.

Even if Microsoft was actually serious about quitting the plan to ever acquire Yahoo, the sleepy and boring Yahoo could not afford to go back to slumberland. The pressure is building up and speculations are circulating that Yahoo has to choose its sleeping partner(s) sooner rather than later. It could sleep with Google Inc. or News Corp. or other partners not identified as yet. Yahoo can sleep well knowing it has at least $33 a share to fall back (Microsoft’s offer) should there be no other buyers or partners. And to demand a higher price, Jerry Yang has no other choice but to build his points that the company worth more than $33 a share offered.

Jerry’s immediate bullet is the partnership with Google and such partnership could boost 2009 EBITDA by 32% and revenue increment of between $1.5 and $2.3 billion. Jerry was adamant about $38 a share before he was willing to let go of the company he co-founded. But do you really need to rush in to buy Yahoo stock now? The pot is still sizzling hot now. Just let it cool and chances are you might be able to scoop the stock at a lower price than now. It’s not that Microsoft will come back tomorrow, next week or another month with a fresh offer. So you’ve all the time to wait for a lower stock price.

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