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Yahoo shares up after Sanford C. Bernstein upgrade

Yahoo Inc. shares climbed Tuesday after a Sanford C. Bernstein analyst suggested investors are undervaluing the stock.
/ Source: The Associated Press

Yahoo Inc. shares climbed Tuesday after a Sanford C. Bernstein analyst suggested investors are undervaluing the stock.

Raising shares to "Outperform" from "Market Perform," Sanford's Jeffrey Lindsay said his analysis shows the market is valuing Yahoo at only $4.40 per share after stripping away cash and the company's Asian assets.

"In our view," he said in a note, "the core business is worth at least double this."

Yahoo shares rose 79 cents, or 5.1 percent, to $16.36 in afternoon trading.

Lindsay said most of the Yahoo shareholders that were waiting for a lucrative deal with Microsoft Corp. have already "voiced their displeasure" with the agreement the companies struck by dumping the stock.

Microsoft and Yahoo announced a search partnership in July after years of negotiations. It puts Microsoft in charge of Yahoo's search business and gives Yahoo 88 percent of the revenue generated by it. But Yahoo got no upfront payment, leading many to question the deal.

"We think this will relieve the pressure on management for deals and quick fixes and let them get on with the job of turning the company around," Lindsay said.

He added that Yahoo's current share price ignores a number of factors. First, that display advertising is likely to return somewhat over the next two years. "There are already signs that display advertising in autos, financial services and retail is starting to come back," he said.

Nor does the price factor in better productivity or performance from new management. Lindsay said Yahoo's CEO, Carol Bartz, and Chief Financial Officer Tim Morse, "have long-established reputations for both."