Bob Peck On Why Yahoo! Is A Buy Opportunity For Investors Right Now

Yahoo! Inc. (NASDAQ: YHOO) shares fell drastically on Tuesday amid concerns that the changes in tax-free treatment of spinoffs by the IRS could affect the company's Alibaba Group Holding Ltd (NYSE: BABA) stake-spinoff arrangement. However, according to SunTrust Robinson's Bob Peck, this slump has created a buying opportunity in Yahoo.

Peck was on CNBC recently to explain why.

Worst-Case Scenario Is Priced In

"Yahoo currently trades at a negative EBITDA multiple, and I think what's important for investors here is to look at the sum of these parts," Peck said. "So, if you took Yahoo! Japan and even taxed it at 20 percent, it's about $7 a share. If you took their core EBITDA, multiply it by a 5 multiple, it's a discount to AOL 7.5 takeout. That's $5 a share and then $6 cash. That's about $18."

Related Link: Analysts Maintain Yahoo Ratings, Despite Spinoff Risk

He continued, "Even if you fully taxed Alibaba at 40 percent, that's $21 additionally, which would be a $40 share price. You took the mid-point here that's actually a $46 share price and you take the zero percent tax as what investors were thinking of, you are talking about a share price in the 50s or so. So, I think right now, the worst-case scenarios on taxes for BABA is being priced in."

Opportunity For Investors

Peck was asked if buying Yahoo here is an opportunity for investors. He replied, "Yeah, we think it's an opportunity for investors. I mean, you are going to have event guys, who may unwind some positions here. But any fundamental investor here, you are getting this core for free and actually at a steep discount."

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