Discounted cash flow model and SWOT analysis of Yahoo
Discounted cash flow analysis for Yahoo
The DCF model (In the excel sheet)
All the figures in the DCF model are in the US Dollars. The company’s value is well determined using the comparison of the characteristics. The entire DCF model is an investment analysis of Yahoo and it contains the values that are based on the current value of the projected cash flows to be generated by the company. The information is acquired from the company’s financial reports and news, as well as the stock price of the shared data and its considered growth rates.
The cash flow potential of Yahoo is 25%, the potential price $50 and the last stock price is $40.
WACC = Cost of Equity (CAPM) * Common Equity + (Cost of Debt) * Total Debt.
The WACC Discount Rate determines the company’s investment risk. In this case, it is calculated over a long-term.
SWOT analysis of Yahoo
This is the analysis of Yahoo’s strengths, weaknesses, opportunities, and threats
High number of users
Well-built market position
Increased revenue from adverts
Strong brand identification
Enhanced international business
A wider variety of products
Vigorous long-term economic performance
Minimal product introduction cost
Efficient search engine technology
Email services and wide mail subscriber base
Weak competitive advantage because of lack of competition differentiation
Inefficient immediate financial performance
Inadequate proprietary content
Delayed intellectual and technological innovation
A search engine market share of only 6%
Lose of the vigorous market share through the mail
Reducing demand for the funded premium services
Increased rate of uncertainty concerning the upcoming advertisement-based profits
Hard to finish the strategic acquisitions
Hard to acquire user data to set the target for advertisements
Connection of the services to the social media platform
Increasing advertisements through the search engine
Planned business directory growth likely to result to new revenues
High online retain expenditure
Migration to the mobile technologies
Increased and regular changes in the internet sector
Strategic launches and partnerships
Improved advertisement focus and search engine technology
Intense rivalry from other search engines such as Google;, Ask.com, and MSN
Increased competition from the free social media networks such as facebook and MySpace sites
Cultural and international competition
High rivalry from the past media organisations
Many barriers to entry virtually for non-existent
Advanced privacy rules
Blocking technology for the online advertisements
Exposure to financial conditions leading to the reduction of the advertisements
High number of users; Yahoo has very many users or subscribers because of the provision of goodwill services, which tend to attract numerous users. Yahoo has a well-built market position and realizes increased revenue from adverts, as well as enhanced global business(Hill, Jones, & Schilling, 2014)
Strong brand identification; Yahoo has niche brand and a very strong brand identity, which enables the rise of the margins through charging of the premium costs for the goods. The increased margins are based on the fact that customers use it many times.
A wider variety of products; Yahoo is directly connected to the social media sites such as facebook and twitter, thus working efficiently with the subscribers to those social media sites.
Vigorous long-term economic performance; This is because Yahoo as a portal web site provides a variety of diverse services effortlessly identifiable from its home page(Goldman, 2011). This allows easier viewing to the customers. Yahoo incurs minimal product introduction cost and is an efficient search engine technology
Email services and wide mail subscriber base; Yahoo is widely known because of the strong existence in the email services, which let for synergies containing additional segments of any kind of an online organization.
Weak competitive advantage because of lack of competition differentiation; Yahoo is not as vibrant as the minor competitors and that is why it mostly loses its innovative edge and elasticity once it continues growing bigger. The growth of Yahoo prevents its innovativeness in new and small ideas that enhance provision of customer satisfaction(Hill, Jones, & Schilling, 2014).
Inefficient immediate financial performance; Yahoo has some reducing operating margins especially in an extensive bull market and this is possible to cause some issues when the economy is at recession. The data centre incurs lots of money to operate. Among the significant costs is the payment for the energy consumed during the customer service and for the advertisements operations.
Inadequate proprietary content; Yahoo search engine is affected by the attack of the company’s middle products. This also causes the decline of the company’s revenue and increment of the associated expenses.
Delayed intellectual and technological innovation; this becomes the case in Yahoo because of the increased reliance on the traditional products for the improved performance of the search technology(Son, 2011).
A search engine’s market share of only 6%; Yahoo is a weak search engine; whereby the search technology is dominated by Google technology, which is identifies to be a strong search engine. Yahoo might continue offering the market share to its competitors and continue losing the percentage of its market share.
Lose of the vigorous market share through the mail; Yahoo concentrates on the provision of mail services, which do not offer an efficient market share compared to other search engines, such as Google and Ask. com(Goldman, 2011)
Reducing demand for the funded premium services; Yahoo charge high prices for the premium services and this makes the customer to migrate to other companies where they get them freely or are just funded little money.
Increased rate of uncertainty concerning the upcoming advertisement-based profits; Yahoo fails to initiate new products; thus the increased dependence on the traditional products for the projected product development. The more the company delays to launch new services or products, the more it fails to plan for its future growth(Lei, & Li, 2012).
Hard to finish the strategic acquisitions; because of poor innovation capacity in the company
Hard to acquire user data to set the target for advertisements; Yahoo allows privately operated user pages and many users restrict their information from access to other people. This makes the company fail to acquire the desired user information in case of some demanding issues.
Connection of the services to the social media platform; Yahoo is directly connected to social media sites; such as facebook and there is the possibility of grown connection as time goes by.
Global expansion; the mobile broadband enhances the diversity of communication and this tends to increase the company’s margins and revenues. The customer demand for Yahoo will continue growing as globalization extends to many companies and individuals. Yahoo will also have access to the rural users and the service will make the number of potential users to increase; hence, the increased profits for the company.
Increasing advertisements through the search engine; because of the efficiency of the yahoo as an advertisement technology, its demand is likely to increase(Goldman, 2011).
Planned business directory growth likely to result to new revenues; the data users will experience net neutrality because if the ability of the information to pass through online and enhance communication between the users. This will allow Yahoo a chance to collect more revenues.
High online retain expenditure; the expansion of the internet usage internationally leads to the reduction of expenses associated with the online operations.
Migration to the mobile technologies; Because of the technological growth, it will be possible for Yahoo to migrate to other mobile networks.
Increased and regular changes in the internet sector; the internet sales in Yahoo increase at a very high speed. Given that it is a product subjected to some increased fuel prices, yahoo will have a chance to improve the quality of the internet sales(Wang, Wang, Wang, Li, Liang, & Xu, 2012)
Strategic launches and partnerships; Yahoo has a potential merger with the Microsoft and this is possible going to save Yahoo through the reduction of the operating cost in relation to the current economies of scale.
Improved advertisement focus and search engine technology; The increased demand for advertisement services will lead to the company’s improved ads target and acquisition of an improved search engine strategy.
Intense rivalry from other search engines such as Google; Ask.com, and MSN; Google is widely known to be a leader among other search engines. It is not possible for Yahoo to catch Google even if it partners with other search engines(Goldman, 2011).
Increased competition from the free social media networks such as facebook and MySpace sites; Yahoo charges for advertisements and access to the premium services and this makes many customers to go for free services from other search technologies.
Cultural and international competition; there is an increased competition because of globalization and this leads to the reduction of the revenue and minimal profits.
High rivalry from the past media organisations, which makes Yahoo loses its market value and fail to realise the expected improvements(Son, 2011). Other major threats include; the increased barriers to entry virtually for non-existent, improved privacy rules, hindering technology for the online advertisements, and exposure to financial conditions leading to the reduction of the advertisements.
Goldman, E. (2011). Revisiting search engine bias. William Mitchell Law Review, 38(1), 12-11.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Lei, A. Y., & Li, H. (2012). Using Bloomberg Terminals in a Security Analysis and Portfolio Management Course. Journal of Economics and Finance Education, 11(1), 72-92.
Son, J. B. (2011). Online tools for language teaching. TESL-EJ, 15(1), 1-12.
Wang, L., Wang, J., Wang, M., Li, Y., Liang, Y., & Xu, D. (2012). Using Internet search engines to obtain medical information: a comparative study. Journal of medical Internet research, 14(3), e74.