Yahoo Inc's plan to keep a larger-than-expected stake in e-commerce giant Alibaba after the Chinese company's IPO prompted at least seven brokerages to raise their stock price targets on the US company. Shares of Yahoo were set to open 3 percent higher after the company said it was selling less of its 24 percent stake in Alibaba Group Holding Ltd's planned initial public offering in 2014.
Analysts expect Yahoo to benefit from retaining a larger stake in Alibaba, which reported strong sales and profit growth in the second quarter.
Yahoo reported tepid profits on Tuesday, in the face of strong competition on online advertising from Facebook Inc and Google Inc.
The brokerage, which has a "buy" rating on Yahoo, valued the company's Asian assets, which include Alibaba and Yahoo Japan, at about $29 per share on a fully taxed bases. That is 86 percent of Yahoo's Tuesday closing price of $33.38.
At least seven brokerages raised their price targets on Yahoo by as much as $9 to $38 a share, while two cut their targets.
Alibaba is preparing for an IPO that analysts expect to raise as much as $15 billion. Yahoo, which owns 24 percent of Alibaba, cut the maximum amount it planned to sell to 40 percent of its stake from a previous sale of half.
Analysts at J.P. Morgan Securities and Cowen and Co were, however, cautious on Yahoo's core business as display advertising revenue fell 7 percent, marking the fourth consecutive quarter of year-over-year declines. The company also lowered the midpoint of its annual revenue forecast.
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