Why Cashing In On Alibaba Right Now Is The Right Call For Yahoo

When Yahoo! Inc. (NASDAQ: YHOO) reported its fourth-quarter earnings on Tuesday, shareholders were more interested in what the company planned to do with its additional stake in Alibaba Group Holding Ltd (NYSE: BABA) rather than the performance of the company’s core business.

Yahoo announced that it would be spinning off the additional Alibaba stake along with what it calls "legacy, ancillary businesses" into a separate public entity, which will save $16 billion in taxes. Rich Munarriz, senior analyst at The Motley Fool, was on CNBC to discuss why this was a right decision by Yahoo.

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“I think in a few years if Alibaba keeps growing and Yahoo stays stagnant, we will be saying, 'Oh, they should have held a little longer,'” Munarriz said. “Yahoo once held a big stake in Google that it sold too soon, but right now it’s the right call. Marissa Mayer needs to do this. Her company I mean this is the third year in a row where revenue has been flat or declining.”

He continued, “There’s a lot of good things happening at Yahoo’s core business, but Alibaba is really the one reason that the stock has done so well under her watch and cashing in on it right now when it’ll be like more than $41 a share for Yahoo investors, it is the right call.”

More Pressure On Mayer

"I mean, it is going to put more pressure now on the core business. I mean, there’s that 35 percent stake in Yahoo! Japan that’s worth about little more than $7 a share of Yahoo and the company has a little more than $10 a share in cash. So, it has money to buy its way out of this rut, but at the end of the day it's going to have to be Marissa that's going to have to find a way to grow its business," Munarriz added.