By Tiernan Ray
Shares of Yahoo! (YHOO) are up 49 cents, or 3.3%, at $15.50 after the company last night beatQ1 estimates, forecast this quarter’s revenue slightly ahead of consensus, and CEO Scott Thompson on the conference call following the report laid out a vision for “six points” he intends to pursue as the strategy to return the company to growth.
That strategy has satisfied neither bull nor bear this morning, judging from the notes I’ve seen.
However, there seems to be goodwill toward Thompson and people seem impressed with his personal style and sense of conviction. And, anyway, estimates are going up:
Gene Munster, Piper Jaffray: Reiterates an Overweight rating and an $18 price target, while raising his 2012 estimate to $4.47 billion in revenue and 97 cents EPS from a prior $4.39 billion and 79 cents. Munster seems encouraged by the take-charge manner of Thompson’s remarks last night: “Yahoo!’s new CEO Scott Thompson has firmly established himself in role as leader of the organization. Thompson said that he is not satisfied by the company’s current revenue growth rate, which we believe is the long term key for Yahoo!’s success. The company stated that it will invest up to 500 bps of margin to invest in new opportunities, which it will offset by the recent and ongoing reorganization of the company. Additionally, Thompson believes Yahoo! spread itself too thin and expects to shut down 50 properties in the coming months.”
Sameet Sinha, B. Riley & Co.: Reiterates a Buy rating and a $20 price target. Sinha liked the stronger-than-expected results in search, the discipline on operating expenses, the quarter-over-quarter 1% growth outlook, and the mention on the call that “conversations with Alibaba are ongoing” regarding how to monetize Yahoo!’s stake in its Asian assets. He wasn’t entirely satisfied by the strategy laid out, however: “We were waiting for more details around the plans for the company formulated by the new CEO. Management did provide some details but were short on specifics. Understandably, management cannot open the kimono here but some additional thoughts would have been helpful.” Sinha raised his 2012 Ebitda estimate to $1.77 billion from $1.68 billion, and raised his 2013 estimate to $1.93 billion from $1.86 billion.
Jim Frieldland, Cowen & Co.: Reiterates a Neutral rating, writing that while the strategic plan is “aggressive,” he’s not sure it will amount to much: “We expect Scott Thompson’s strategic plan to yield higher near term profits, excluding restructuring costs. However, we remain skeptical on the company’s ability to meaningfully reaccelerate growth given the secular headwinds in search and display.” Friedland raised his estimates for this year to $4.44 billion from $4.43 billion and to $1.22 per share from $1.04 per share.
Brian Nowack, Nomura Equity Research: Reiterates a Neutral rating and a $14 price target. Although search was the “bright spot,” Yahoo! is still challenged to make the Microsoft deal work: “That said, MSFT adCenter remains an issue as YHOO again did not close the RPS gap as much as they hoped. YHOO remains confident it will close the RPS gap before the MSFT guarantee expires in 1Q:13, but this remains a risk, as we believe adCenter is still monetizing at roughly 30% of the rate of Panama.” The strategy was lacking: “We did not hear any specific strategies to bring eyeballs back to YHOO. Management said it will eliminate ~50 underperforming sites to hone its focus on the core verticals mentioned above, and it intends to re- emphasize the Yahoo! Commerce business (autos, travel and shopping) […] we continue to need a sign that the long-term top-line concerns will abate before we would turn more positive.”
Clay Moran, The Benchmark Company: Reiterates a Hold rating and a $17 price target. He also thinks the strategy needs to be more clearly defined: “He did not articulate any meaningful change to Yahoo’s operating strategy except via an as yet-to-be-defined Commerce segment. We think more dramatic change is required to improve Yahoo’s growth prospects.”
“Yahoo was just a complex mess in terms of reporting structures,” said Sameet Sinha, an equity analyst with B. Riley & Co. “Scott’s just saying, ‘Let’s take it apart.’ “
Continue Reading >“Yahoo has some 700 million visitors per month,” said Sameet Sinha, an analyst at B. Riley & Company. “It’s a matter of figuring out how to properly monetize them.”
Continue Reading >Yahoo! Inc.’s discussions to sell its stake in Alibaba Group Holding Ltd. and its Japanese operations in a tax-efficient manner have reached an impasse, according to a person briefed on the matter.
Representatives of Alibaba and Softbank Corp., co-owner of Yahoo Japan Corp., are prepared to approach Yahoo Chief Executive Officer Scott Thompson to explore another arrangement that would let companies buy back their stakes, said the person, who asked not to be identified as the talks are private.
Continue Reading >Sameet Sinha, an Internet analyst at B. Riley & Co., said one way for Yahoo to get closer to people’s “purchase decisions” and take a cut of transactions would be to acquire a company such as Bankrate Inc., which helps consumers find mortgages or other investments; Angie’s List Inc., which publishes reviews of contractors, doctors and other service providers; Yelp Inc., which also provides information on local businesses; or Trulia Inc., which helps people search for real estate.
Continue Reading >Alibaba.com Ltd. (1688) suspended its shares from trading in Hong Kong as the company prepares a statement about a transaction involving its parent, which is raising about $3 billion to buy back stock held by Yahoo! Inc. (YHOO)
Continue Reading >The Sunnyvale, Calif., Internet company, which is now shopping itself to potential buyers, on Tuesday said that its third-quarter profit dropped 26% from a year earlier while revenue fell 24%. Yahoo also reported its fourth consecutive quarterly slowdown in the growth rate of its display-ad sales—its most important business, which includes graphical, interactive and video ads. Display-ad sales revenue was flat from a year earlier.
Continue Reading >A focal point of board discussions are Yahoo’s Asian holdings—a 40% stake in China-based Alibaba Group Holding Ltd. and a 35% stake in Yahoo Japan—which represent one-third to one-half of Yahoo’s overall value, according to analysts from B Riley & Co. and Stifel Nicolaus & Co. Yahoo has a market capitalization of about $18 billion.
Continue Reading >Regardless of who follows Bartz, Sinha said the next CEO must focus on reinvigorating employee morale and updating technology. “[Yahoo] employees have been disheartened for the last four years,” he said. “There are so many fast-growing companies out there that tech employees can leave and get a job anywhere. They need to stop the exodus of people leaving Yahoo.” But he emphasized that breathing new life into a tech company past its prime has not proven to be an easy path. Numerous CEOs have tried—and failed—to revive Yahoo. Meanwhile, at competitor AOL, CEO Tim Armstrong is struggling through his own company’s rehabilitation. EBay is the rare company with a turnaround success, which was largely thanks to PayPal, Sinha said.
Continue Reading >“We are initiating coverage…with a Buy rating and a 21 price target. We believe the next 12 to 18 months should provide a win-win situation for investors: Either the management team will turn this company around, or the mounting investor discontent will force management to take steps to unlock value in its assets.”
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