An Alibaba employee walks through a communal space at company headquarters in Hangzhou in 2012.(Photo: Peter Parks, AFP/Getty Images)
SAN FRANCISCO — Yahoo reported lackluster quarterly results late Tuesday, but Wall Street is focused on the ballooning value of the company’s stake in Chinese e-commerce giant Alibaba.
Alibaba is planning an IPO in the U.S. and its results and estimated valuation have jumped recently. During the second quarter, Alibaba revenue rose 61% to $1.74 billion and the company has an operating profit margin of almost 50%.
Such performance, and a surge in shares of rival Chinese Internet and e-commerce companies recently, has Wall Street estimating that Alibaba will be worth about $120 billion when the company goes public – almost as much as Amazon.com.
Gene Munster, an analyst at Piper Jaffray, said in a Wednesday note to investors that he previously estimated Alibaba was worth about $75 billion, but reckons it is more like $120 billion now.
Yahoo said late Tuesday that it struck a new agreement with Alibaba, allowing it to keep more of its stake in Alibaba when the IPO happens. Previously, Yahoo had to sell half its stake, but that was lowered to 40%.
If Alibaba shares pop when it goes public, the company could be worth $150 million — and Yahoo will be able to benefit more from that by holding on to more of its stake, Jordan Rohan, an analyst at Stifel Nicolaus, wrote in a note to investors after Yahoo results.
“Not only will the remaining shares be valued at a higher valuation, but there is a better than average chance that Yahoo will be able to sell that second tranche tax efficiently, now that the company can take its time and sell the remaining stake at its discretion,” Rohan said.
Yahoo may squeeze an extra $500 million to $2.5 billion out of the situation, because of this new agreement, the analyst estimated.
Yahoo shares rose 2% to $34.05 in morning trading Wednesday.
