The YHOO Stock Price Is in Trouble Heading into 2016

yahoo stocksA new candidate to take over Yahoo's Internet business just emerged, but the YHOO stock price hasn't reflected optimism that an acquisition will materialize.

According to The Washington Post, Verizon Communications Inc.'s (NYSE: VZ) CFO Fran Shammo said Verizon could be interested in buying Yahoo's Internet businesses. But Shammo was vague, saying a deal would only happen "if Yahoo is right."

So far, the acquisition rumors haven't provided any momentum for the Yahoo stock price...

The Wall Street Journal first announced Yahoo planned to sell its Internet Business on Dec. 2, and the YHOO stock price has dropped 0.02% since. The YHOO stock price was trading at $34.55 early this afternoon, 0.37% below its closing price of $34.68 yesterday.

Amid pressure from activist hedge fund Starboard Value, CEO Marissa Mayer is exploring opportunities to unlock more value for Yahoo! Inc. (Nasdaq: YHOO) shareholders. Mayer has more than doubled the YHOO stock price from its closing price of $15.84 at the end of July 2012, when she first took over.

But several unsuccessful campaigns have limited the value of YHOO stock for shareholders in recent years...

Mayer has attempted to reduce Yahoo's dependence on its worn home-page traffic, but her vision has not added to Yahoo's bottom line. Since 2012, Yahoo's revenue has decreased by 7.97%.

The CEO's biggest move was hiring well-known journalist Kate Couric as the Global Anchor for Yahoo! News. It's not clear how well the move has paid off, but Mayer still decided to increase Couric's salary from $6 million to $10 million in June.

Mayer stated in October that she has a plan to change Yahoo's focus. But investors can't wait any longer for Mayer to try and increase Yahoo's profitability.

The lack of progress from Mayer is a red flag for YHOO shareholders. But there was a huge warning sign in the last year that the YHOO stock price is headed for a downward spiral...

The Warning Sign That the YHOO Stock Price Is in Trouble for 2016

Since August, Mayer has made an act of pure desperation.

According to Re/code, Mayer told her top executives that they had to make a commitment in writing or verbally to stay with the company for three to five years.

You see, Mayer has struggled to retain key talent. In fact, executives she handpicked for positions are fleeing Yahoo...

Development Chief Jack Reses (handpicked) and Marketing Partnerships leader Lisa Licht both left in October. CMO Kathy Savitt (handpicked) and Senior Vice President of Yahoo's home page Peter Chernin left before that, and Re/code reported that 10 other executives have left Yahoo since the end of 2014.

Part of the mass exodus of Yahoo executives may be related to the fact that Mayer has not established an identity for the company. That has made it difficult for Yahoo to innovate.

Outside of Yahoo! Mail and Yahoo! News, Yahoo lacks a compelling reason for people to use its services. According to The Journal, Mail and News are the third most visited sites in the United States, and just in October, these two sites received a combined total of 210 million visitors.

But Mayer never found the secret sauce to make these services a significant source of revenue.

For a deal to take place, Verizon will have to be very confident that it has the capabilities to make Yahoo's Internet business profitable.

And if Yahoo continues to struggle finding a buyer, the YHOO stock price will remain stagnant into 2016.

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Additionally, Yahoo's earnings have missed estimates for three straight quarters, and the company is expecting earnings to drop 56.7% next quarter.

The Bottom Line: Verizon has emerged as a possible suitor for Yahoo's Internet business, but the rumors have done little to move the YHOO stock price. Now is not the time for investors to buy into Yahoo stock, as the company continues to have problems increasing its profitability.

Jack Delaney is an associate editor for Money Morning. You can follow him on Twitter and follow Money Morning on Facebook.

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