Yahoo's Stock Surges As Analysts Say Concerns Over Alibaba Stake Spinoff Are Overdone

Yahoo Inc.'s stock surged 2.9% in premarket trade Wednesday, after analysts said the sharp selloff late Tuesday, on concerns that the company's plan for tax-free spinoff of shares of Alibaba Group Holding might be derailed, was an overreaction. The stock had tumbled 7.7% in the final 30 minutes of regular-session trade Tuesday following reports that the Internal Revenue Service was considering changes to its rules governing spinoffs. Morgan Stanley analyst Brian Nowak even the most bearish outcome of potential IRS changes, such as not being able to spinoff its Alibaba stock or being taxed at a full 35% rate, would still offer 8% upside to levels seen late Tuesday. "Official details are still murky, and while this could complicate [Yahoo's] pending [Alibaba shares] spinoff, we view [Yahoo's stock's] negative reaction as a buying opportunity," Nowak wrote in a note to clients. Cantor Fitzgerald analyst Youssef Squali reiterated his buy rating on Yahoo, saying that even under a worse case scenario for the spinoff, he believes the stock's value is "compelling" at prices seen after Tuesday's late selloff.