Here’s some stock trader buzz for you. AOL shares just went vertical.
Initially we just knew that there was trader buzz about some analyst note going around about how possibly Yahoo could buy AOL though we weren’t sure the nature of it.
Now we’ve seen the note. It’s not a prediction. It’s from Richard Anthony, a derivatives analyst at BGC, who speculates on what Yahoo might do with its cash, after Alibaba goes public
Investors may seek to have upside exposure to shares of AOL for two reasons, 1) the company is heading into the seasonally stronger December quarter and 2) post the Alibaba IPO, there is a possibility that Yahoo may seek to deploy its cash by pursuing AOL as an acquisition target. While AOL may not seem like a flashy target, there is considerable overlap between the two businesses that may make a tie-up compelling. Using Bloomberg consensus 2015 revenue estimates of $US4.4B for Yahoo and $US2.8B for AOL, acquiring AOL could accelerate Yahoo’s revenue by over 60%. With a market capitalisation of $US3.3B, AOL may prove to be a tempting target.
So there you go. It’s just an analyst positing an options trade.