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Monday, October 16, 2006

Cramer Evaluates Yahoo!

Cramer said that Yahoo! (YHOO) is the proverbial Falling Knife, and it is hurting trying to catch it. He says you have to evaluate how to value it, and first is earnings. He said YHOO's earnings are a travesty. He said $0.47 and $0.65 EPS are the consensus for this year and next. Cramer said the earnings estimates are TOO HIGH and he thinks they'll cut guidance for next year. He thinks it will do less than $0.50 for next year and that could mean it is a $12 stock instead of a $24 stock. Then he said to visit the chart. On support it should count down to $20.00. Cramer said if the throw out everything but the kitchen sink, then they could bottom and participate in the Q4 tech rally. He said YHOO needs to trim its earnings estimates by 25%. He thinks Semel may be a management issue now and he hasn't given any clue of leaving, but he'd be worth $1.50 to $2.00 if he got fired. He said the most intriguing thing is to look at YHOO as a potential takeover candidate from 4 potential suitors: Microsoft-(MSFT), or even Viacom-(VIA), or Comcast-(CMCSA), or an AT&T-(T).

He said on the bottoming out, it could go to $21 if they throw everything but the kitchen sink out and THEN it could rally.

YHOO closed down almost 1% at $24.18 on the day, and it fell to $23.82 in after-hours after Cramer panned it the day before earnings.

Jon C. Ogg
October 16, 2006
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