Top Wall Street analyst believes there's a chance Yahoo won't even get sold

After months of reports that Yahoo’s in talks for a potential sale of its core internet business, SunTrust’s analyst Bob Peck says there’s a chance a deal won’t even happen at all.

In a note published Monday, Peck wrote it’s still possible that Yahoo could walk away from a deal if it doesn’t find an attractive offer for its internet business, which the company was once reported to have valued at $10 billion.

Peck wrote $10 billion would be a “stretch” for Yahoo’s core business at this point. He believes the following risk factors could make the bids to come in lower than expected, and cause Yahoo to pursue a spin-off of the core internet business instead:

The core business is declining at a double digit pace: Last quarter’s revenue ex-TAC dropped 18% year over year. “The core business is melting like a melting ice cube,” Peck writes.

Overall digital advertising pie is growing, but no one’s spending on Yahoo: US online advertising grew 21% in the first quarter of this year to roughly $16 billion. But according to Standard Media Index, ad spend on Yahoo is expected to be down by 30% this year.

Lots of unknown factors around Yahoo’s business: Even though the sales process has been going on for five months, there are still a lot of unknown deals around Yahoo’s business that potential buyers are just getting to learn. For example, it was reported just last week that Yahoo would have to pay Mozilla more than $1 billion until 2019, even if the browser company walks away from a search deal.

“We think it is quite possible that bid prices could actually have declined during the past month…At some price level, the Board may feel it is better to simply spin off the core to shareholders in a taxable transaction,” Peck writes.

Still, Peck pointed out Yahoo’s likely to find a buyer for its core business and patent portfolio at the $6 billion price range. But because of higher contingencies around some of the previously unknown deals, like the Mozilla deal, and the complex nature of liquidating its Asian assets in Alibaba and Yahoo Japan, Peck downgraded Yahoo from a “buy” rating to “neutral.”

Yahoo shared remain roughly flat as of Monday afternoon EST.

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