Analysts downgrade Yahoo stock after Microsoft withdraws bid
NEW YORK—Yahoo Inc.'s shares sank Monday and several analysts downgraded the company's stock after Microsoft Corp. withdrew its $47.5 billion takeover bid for the Internet icon.
The bid was withdrawn on Saturday, following the companies' inability to agree on a purchase price.
Yahoo shares fell $4.47, or 15.6 percent, to $24.20 in Monday afternoon trading. In the past year, the stock traded between $18.58 and $34.08, rising dramatically after Microsoft's unsolicited bid was announced at the beginning of February.
Canaccord Adams analyst Colin Gillis cut his rating to "Sell" and dropped his price target to $21 from $35 in a client note, saying that the bid withdrawal could lead Yahoo's stock to trade down to around $23 per share.
"We point out that the Microsoft bid has served as a much-needed catalyst for Yahoo -- the company is acting with new urgency to drive innovation, open its platforms, control its costs, and renew team spirit," he said.
The analyst said Yahoo is "making strides" but he'll be keeping an eye out for its fourth-quarter report to see if fundamental improvements are revealed in its income statement.
Meanwhile, ThinkPanmure analyst William Morrison lowered his rating for Yahoo shares to "Sell" from "Accumulate" and cut his price target to $20 from $31 in a client note.
The analyst said Yahoo's rejection of Microsoft's bid may likely "go down as one of the more destructive decisions for shareholder value in the history of Internet stocks."
"We believe the best-case scenario for shareholders may be for a declining share price and worsening fundamentals in coming quarters to force Yahoo management back to the bargaining table," he said.
But the withdrawal of Microsoft's offer does not mean Yahoo will necessarily forge ahead alone -- the Sunnyvale, Calif., company had been said to be in talks with Google Inc., News Corp.'s MySpace.com and Time Warner Inc.'s AOL, and several analysts still see the possibility of an alternate deal.
Susquehanna Financial analyst Marianne Wolk said in a client note that she expects Yahoo to continue discussions with these companies as it works to improve its position in the online advertising market.
"The most likely scenario, in our view, is an outsourcing agreement for a segment, not all, of its search business to Google, which we view as a major beneficiary of Microsoft's dropped Yahoo bid," she said.
Google shares rose $9.50 to $590.79.
