Shares of Yahoo! Inc. (NASDAQ:YHOO) were trading down 3% on Friday after analyst Robert Peck of SunTrust rated the company and suggested leadership changes. The analyst reiterated a Buy rating on the stock with a $40 price target. Although he is concerned about recent leadership activity, he believes the board of directors will take concrete action to save the company.
Peck notes investor concern over the company’s tax status regarding its stake in Alibaba, progress in core business activities, and “the stability and direction of management,” citing that management has not fulfilled its revenue goals in the past 3 years. Specifically, he points to CEO Marissa Mayer’s Q3 earnings release announcement of a “unique opportunity to reset and realign,” which the analyst states did not occur in the last 3 years. He cited a broader “lack of tangible progress in: People, Product, Traffic and Revenue…”
The analyst also voices concern over management turnaround, stating that 13 key executives have resigned from the company in 2015 alone. Although the CEO states that these changes are for the betterment of the company, and “the result of careful planning,” the analyst points out that the CEO hired the leadership to begin with. Peck believes that internal restructuring is not the right move for the company. He suggests instead that the board of directors examine the company’s leadership more closely, and “consider changes at the CEO level.” Peck concludes his report by suggestion that the board examine management’s level of support in regards to the following 4 factors: “senior executives, employees, partners, and investors.”
Overall, Robert Peck has a 55% success rate recommending stocks with an average return of 8.2% per rating. According to TipRanks’ statistics, out of the 26 analysts who have rated YHOO in the last 3 months, 16 gave a Buy rating, while 10 remain on the sidelines. The average 12-month price target for the stock is $41.35, marking a 28% upside from where shares last closed.
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