Yahoo price target cut to $21 a share
A Sanford C. Bernstein analyst also cites several reasons related to the proposed Google-Yahoo deal why a transaction between Yahoo and Time Warner's ailing AOL is unlikely.
Yahoo's price target was snipped to $21 a share from $24 on Monday by a Wall Street analyst, following the Internet search pioneer's confirmation that it is delaying its controversial search-advertising deal with Google.
Sanford C. Bernstein analyst Jeffrey Lindsay noted in a research note that despite reports that Yahoo is in talks with Time Warner, the probability of a deal between the media conglomerate's struggling AOL unit and Yahoo remains relatively low, in part due to antitrust regulators' concerns about the proposed Yahoo-Google deal.
In his research noted, Lindsay stated:
Regulators might not allow the AOL-GOOG paid-search deal to pass to YHOO, which would wipe out the other synergies--creating a large risk for both sides. We are reducing our YHOO price target to $21 but maintain TWX (Time Warner) at $18.50.
In addition, Lindsay points out that stock transactions over $3.4 billion are dilutive to Yahoo's shareholders and that Time Warner was likely hoping to receive $6 billion to $8 billion for AOL, which is possible only if Yahoo can gain some synergies from the transaction.
A third point Lindsay raises:
The primary source of synergies is staff reductions, where YHOO has (an) unimpressive track record. Other benefits, such as pricing power in display, and combining Advertising.com with Right Media Exchange, will not drive short-term incremental revenues.
Yahoo's stock on Friday closed at $16 a share, slightly up from $15.58 a share the day before.