A Tale of Two Stocks: Yahoo Stays Low, While AOL Soars High

Who can forget these famous first lines from Charles Dickens’ “A Tale of Two Cities”:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness …”

Now, look at this chart comparing the year-to-date stock performances of Yahoo and AOL, very similar companies with very different numbers:

Can AOL really be up more than 123 percent, while Yahoo — even after the appointment of a high-profile new CEO, Marissa Mayer, from Google — be down 8 percent?

The results for the past three months are slightly less pronounced, with AOL up almost 23 percent to Yahoo’s more than 4 percent decline. And, for the past month, AOL is up 7 percent and Yahoo is down almost 8 percent.

What gives — especially since Yahoo is arguably the company with better assets, properties and long-term prospects?

It seems to be a simple question of investor expectations met (AOL) versus expectations still unanswered (Yahoo).

In AOL’s case, for example, CEO Tim Armstrong — also an ex-Googler — finally seems to have delivered on assuaging investor worries about the slowness of the turnaround with better results at the New York-based, content-focused portal. In addition, the company just announced the particulars of a long-expected buyback of shares, and also a dividend from a $1.1 billion patent sale.

In other words, even if this means only a windfall for shareholders who bought in the trough a while back, investors are still cheering on such moves, and moving the stock to highs of $34 a share.

Many think that might not last, of course, unless Armstrong can keep up the advertising and other business gains, but — for now — investors are happy with him and AOL.

At Yahoo, though, it is still wait and see for Mayer, who is only just starting to put her own staff in place. So far, that seems to be to infuse some new blood, while also trying to get some of those pushed aside to stay — no packages for no one! — and help out.

Also a big question mark is the plan to revive Yahoo. And, while coming out with a strategy only a few months into her reign is definitely premature, the news that Mayer was likely keeping a big chunk of the billions in proceeds from the sale of its Alibaba assets in China, without any specifics to speak of yet, has made Wall Street tetchy and full of questions.

Such as: Will the future be building back up its advertising stack, and isn’t that pricey and difficult, given Google is the main competitor here? Or perhaps copying the e-commerce success in Asia for Yahoo properties, which begs the question of why sell Alibaba in the first pace? Maybe, media is the way (except Mayer was chosen for her tech expertise over content-centric Ross Levinsohn)? And what cool start-ups could be bought, and for how much, and will Yahoo pay too much for them? Lastly, and perhaps most of all, what will the magic set of products that Mayer is clearly capable of creating be, perchance?

Until some more substantive clarity here and elsewhere is delivered by Mayer — whether that’s unfair or not — it means a stock that will stay under a depressed $15 a share.

Thus, with apologies to Dickens, Wall Street investors wait and watch for the spring of hope at Yahoo, after the winter of despair, with hopes to be going direct to Heaven rather than going direct the other way.

And, if not Heaven, then they’ll certainly take $19 a share.