Verizon (VZ) has agreed to sell the rights to Yahoo branding and technology in Japan to Softbank’s (SFTBY) Z Holdings Corporation (ZHD Group). The transaction is expected to generate 178.5 billion yen ($1.61 billion) for Verizon.
The deal with ZHD Group comes after the telecom giant agreed to sell its Verizon Media division, which houses the Yahoo business. That transaction is expected to close in the second half of 2021. (See Verizon stock chart on TipRanks).
ZHD Group has been making royalty payments to Verizon to use the Yahoo brand. Under the new agreement, ZHD Group will acquire perpetual rights to the Yahoo brand in Japan, and the royalty payments will cease. The new agreement is expected to go into effect upon the closing of the pending Verizon Media sale.
With perpetual rights, ZHD Group hopes to have greater flexibility in its use of the Yahoo brand in developing its businesses. ZHD Group says Yahoo Japan will maintain its relationship with Verizon Media after the current license arrangement ends.
In June, Redburn analyst Stephen Malcolm initiated coverage on Verizon stock with a Sell rating and a price target of $50. Malcolm’s price target suggests 11.41% downside potential.
“Verizon has an enviable track record for a scale telecom incumbent. But as an equity, it faces likely revenue disappointment versus over-bullish guidance, rising capital requirements and falling ROCE. With only a 5% true cash yield, there is insufficient room for error,” commented Malcolm.
Consensus among analysts is a Hold based on 2 Buys, 8 Holds, and 1 Sell. The average Verizon price target of $59.44 implies 5.32% upside potential to current levels.
VZ scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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