Should you buy YHOO now?

I recently asked this question on my Google+ page. I got some comments there and a few good ones privately emailed to me or in other forums. Here's the wisdom of the crowds, colored with my own perception and understanding.

Pros

• Traffic. YHOO still attracts a lot of eyeballs. It's one of the top 3 destinations on the web where people spend time. So, the potential is there for more revenue.
• Valuation. About $1B in earnings expected this year, which would put the forward P/E at a reasonable 15.
• Leadership. Shakeup could provide new steam for company.
• Low expectations. $3B in cash, $14B in total equity and a total market cap of only $18B. Market expects little of this company going forward.
• Buyout. Private Equity companies are already negotiating a buyout, which could lift the shares.

Cons

• Downward trajectory. YHOO has been declining in traffic, revenues and pretty much everything else for a while now. This is hard to reverse.
• Lack of innovation. Enough said.
• Talent. Outflow of talent is certainly higher than inflow. This is a chicken-and-egg problem: it's hard to attract talent when the company is sinking, but hard to turn it around without new talent joining the workforce.
• Limited upside. Any buyout will probably not pay a lot of premium for YHOO, given that they have few other options at this point. 
• Risky. Since YHOO is not exactly a super-bargain, risking real capital to hold the stock just to watch it go lower is, well, risky.

What do you think?

I decided to pass. Mostly because I think the turn around story is flawed and the buyout one is more likely, but with limited upside. However, buying some call options could be a good strategy, depending on valuation. I'm still to look at those.

Disclosures: No financial interest in YHOO (neither long or short) at the time of writing.