Yahoo! Inc (NASDAQ:YHOO) the internet portal could well do with some good news after a difficult start to 2016 and on Thursday it received a shot in the arm from brokers at Citigroup, who raised their recommendation to Buy from Neutral.
The stock may have ended the session only slightly higher on the day, up 0.2% at $37.39, a gain on a par with the Nasdaq ticker, which closed up at 4,844, but it was still good news worth spreading.
Yahoo is currently the subject of an auction process for its core internet assets. Telecommunications giants Verizon (NYSE:VZ) and AT&T (NYSE:T) were set to go through to the third and final round of bidding for those assets.
Citi upgraded the stock citing "a more compelling risk/reward" that included more credible reports on the auction process, as well as Alibaba's (NYSE:BABA) recent positive outlook and agreement to repurchase shares from Softbank. Yahoo has a stake in Alibaba.
Citi also raised its price target for Yahoo to $43 a share, representing a 15% upside from Wednesday's close.
In fact, already Yahoo shares have nearly recovered year-ago levels at $40, so Citi’s intervention is well-timed as we approach July. Citi cited Yahoo's stock performance since it downgraded it to neutral on March 22. Since then, Yahoo has advanced more than 5%.
"We believe at current levels YHOO's price implies a 30-35% discount to the underlying market values for the company's stakes in [Alibaba] and [Yahoo Japan] and a $2-4bn value for Yahoo!," Citi said in a Wednesday note to clients.
Verizon shares closed up 1.2% at $53.46 and AT&T advanced by 0.5% to $40.49.