Although these concerns aren't without merit, firm's thesis remains that although they believe there remains a period of transition for Yahoo! over the coming months, they can't help but see YHOO shares at current levels as a good entry point for investors with 1) a 6-12 month perspective and 2) tolerance for volatility in the short term (1-6 months).
Firm's optimism is driven by several beliefs. First, based on experience with the front-end of Yahoo!'s new search product and conversations with advertisers / agencies / Search Engine Marketers (SEMs) / developers / industry leaders to date, once Yahoo! completes transitioning its advertisers to the new platform, they expect Panama to be a vast improvement over Yahoo!'s prior offering and a more competitive product.
Second, they think the announcement in December related to Yahoo's management restructuring, although reflecting a company in transition, if executed effectively, could be a good thing for Yahoo! long term.
In short ,they think the new management structure, coupled with the launch of Panama, could create a more competitive / galvanized company that begins to execute more effectively in CH2:07E and beyond.And when there are signs that a company may begin to execute on fundamentals amidst overly negative investor sentiment, this usually means an opportunity (e.g. EBAY shares in August 2006), albeit not without risk.
Reiterates Overweight - Firm's Base Case DCF analysis values YHOO shares at $35.
Notablecalls: Not actionable but good to know category.