Shares of Yahoo Inc. dropped 0.9% in premarket trade Monday, after the internet portal was downgraded at SunTrust Robinson Humphrey to neutral. Analyst Robert Peck cut the stock price target to $42, which is 11% above Friday’s closing price of $37.74, from $44. Peck gave four reasons for downgrading Yahoo: 1) Although he expects a positive result from its plan to sell its core business, which could be announced around July 18, the fact that it is so widely anticipated could result in a “sell the news” effect on the stock; 2) the process of selling off its investments in Yahoo Japan and Alibaba Group Holding Ltd. is “convoluted and complex;” 3) the “hook” nature of the Alibaba shares could lower the buyout premium; and 4) a buyout could take a long time–possibly 18 months–to be completed, if it is at all. The stock has climbed 13% year to date through Friday, while the S&P 500 has gained 4.2%.
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