Jerry, better get Steve on the line.
That’s Bernstein analyst Jeffrey Lindsay’s conclusion after running the numbers. In a research note, “Whither Yahoo?” Lindsay looks at the likely outcomes and concludes — surprise! — a revived Microsoft (MSFT) bid is Yahoo’s (YHOO) only chance at anything close to $30 a share.
The possible outcomes, according to Lindsay:
- If regulators derail the Yahoo-Google paid search deal, Yahoo’s 2009 revenue growth will be 15% and EPS 46 cents a share. Yahoo share price: $21.
- If the Yahoo-Google (GOOG) search deal goes forward, and the DOJ keeps Sandy Litvack on the chain, 2009 revenue growth will be 26%, and EPS 61 cents. Yahoo share price: $26.
- If Yahoo dumps Panama and outsources paid search to Microsoft (more likely to pass regulatory muster), 2009 revenue grows 12% and EPS 67 cents. Yahoo share price: $26.
- If Yahoo sells its paid search business to Microsoft outright, that would be worth $27 a share, less than Microsoft $33 estimate because Bernstein believes Alibaba and Yahoo Japan shouldn’t be included in the deal.
Yahoo has managed to show growth in unique visitors and stem a decline in overall page views. But now it’s battling economic headwinds in the U.S., where it derives most of its revenue, making anything other than a Microsoft acquisition the only realistic opportunity for a $30+ outcome for shareholders. Carl?
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