Yahoo’s (YHOO) CEO Marissa Mayer and its M&A chief Jackie Reses have both crushed speculation that Yahoo would buy AOL (AOL: ~$39/share) with its cash from the Alibaba IPO. Mayer reportedly told Re/code that an AOL acquisition would be “small, unexciting, uninspiring, and backward-looking.”

I argued in March that AOL, for all the hype over its digital media and advertising segments, was still largely reliant on its legacy subscriber business for profits. Mayer seems to agree, and is reported to view the Huffington Post as the only AOL property she’d be interested in acquiring.

AOL is down 10% since my original article, but it is still significantly overvalued. Its current valuation of ~$39/share implies 13% compounded annual profit (NOPAT) growth for 16 years. A more reasonable expectation of 8% compounded annual NOPAT growth for 10 years yields a fair value of only ~$22/share.

Sam McBride contributed to this report.

Disclosure: David Trainer and Sam McBride receive no compensation to write about any specific stock, sector, or theme.

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