The big rally in Yahoo! (YHOO) did not last long. Modest earnings and excitement about its 40% stake in Alibaba took the shares from $26.55 in mid-October to $33.99 at the end of the month. The stock have been as low as $28.37 today, trading off 5%
Some on Wall St. think that fact that Yahoo! ratted out a journalist in China may contribute to the sell-off. It was certainly a moral lapse, but nothing to bring the stock down. CEO Jerry Yang will be flogged in Congress and the media, but he has bigger problems.
It has dawned on traders that, even if Yahoo!’s piece of new IPO Alibaba is worth $8 billion or so, the price of the newly public company cannot defy gravity for long. And, selling a 40% share of the Chinese firm is impossible. What is on paper is not always what goes into the bank.
And, today AOL posted modest advertising revenue growth of 13% over the same quarter last year. It reminded Yahoo! investors that the portal business is cruel and competitive.
Yahoo! has a three week rally, and now it is over, perhaps for a long time.
Douglas A. McIntyre
The
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