One of the first actions after Marissa Mayer's first earnings call that really lit a fire under Yahoo!'s (YHOO) stock price a few months ago was when Goldman analyst Heath Terry upgraded the stock.
He's at work again this morning when the futures are down with an upgrade of Yahoo! to a Buy and putting it on Goldman's Conviction List.
This is a big deal for Yahoo!. The sell side has been lukewarm on the stock since 2005. Now, someone -- Goldman no less -- is sticking its necks out to recommend it on its Conviction List.
At the same time, of all the current price targets for Yahoo! from the sell side, about half of them are lower than the current stock price.
What that means is that there is a coming wave of upgrades to the stock and Goldman's call today is going to give other smaller shops the confidence to fire away with their own upgrades to the stock. This should provide fuel to the already growing flames of momentum behind the stock.
The big reason why Heath Terry now really likes Yahoo! here and prompted his upgrade is because the stock buyback, using the $3 billion in after-tax dollars from the recent Alibaba transaction, is underway and, according to Terry, hasn't really kicked in yet.
Yahoo! is rumored to be buying back a little bit of its stock every day on the open market. But, according to Terry's report this morning, it still has 76% more in buybacks to go. The company's barely scratched the surface.
Yet, ever since that October earnings call where Mayer seemed very knowledgeable and realistic about Yahoo!'s challenges, the daily volume traded in the stock has been up enormously. Most days recently, Yahoo!'s traded close to 30 million shares.It was around 10-12 million over the summer.
That means Yahoo!'s been in the market, but a lot of the buying is coming from hedge funds and institutions. That's great news for the long-term viability of the stock.
This upgrade should provide another sharp move up to the stock just like Terry's last upgrade.