What is the intrinsic value of Yahoo ?

There is lot of discussion about Yahoo and Alibaba (BABA) IPO. As of today (Sept 10th, 2014) Yahoo closed at $41.14 and has 994,600,000 outstanding shares, trading at market cap of $ 40.917 Billion. Alibaba is going to IPO at price range of $60 to $ 66, let us say $63.

Yahoo owns 22.4% of Alibaba or 523 million shares. If Alibaba stock open at $63 Yahoo share in BABA is going to be $32.949 Billion, makes it BABA market cap of $147.1 Billions

Yahoo owns 35% of Yahoo Japan. As of now Yahoo Japan Market cap is 2.363 Trillion Yens; at 106.83 yens for US dollar it is equivalent to $$22.122Billion. Yahoo’s share at 35 % rate worth $7.73 Billion.

Yahoo earned trailing twelve months $1.226 Billion. At Conservative 12 times earnings its value should be at least $14.713 Billion.

Now add all together: Estimated Alibaba value $ 32,949,000,000
Yahoo Japan $ 7,743,025,821
Yahoo 12 x Earnings $ 14,713,572,000

Total Value $ 55,405,597,821

Share price value should be $55.71. So upside potential for yahoo is approximately $14 or you can say there is big margin of safety if you own Yahoo share at this price.

Assumption here is Alibaba trades on IPO date at $63.

Again this theory, in reality there is always gap between theoretical price and actual price.

Disclosure: I own both Yahoo stock and derivatives. Do your due diligence prior to committing your hard earned money.