By: Brendan Gilmartin - VP, Content & Research
Yahoo! (NASDAQ:YHOO) is scheduled to report 1Q 2013 earnings after the close of trading on Tuesday, April 16. The results are typically released soon after the closing bell and will follow with a conference call at 5:00 p.m. EST. This is a pretty significant quarter for Yahoo! with the company's shares at multi-year highs under CEO Marissa Mayer and the Street eager to learn more about the opportunities facing the company.
Outliers & Strategy
- Non-GAAP Earnings Per Share: Yahoo! typically reports a value for Non-GAAP EPS that is comparable to consensus estimates. The current Street estimate is $0.28, with the high end of the range at $0.34 (Source: Yahoo! Finance). Given the recent jump in the share price, look for Yahoo! to post earnings closer to $0.34 in order to sustain the advance.
- Revenues Ex-Traffic Acquisition Costs (TAC): Yahoo! will report a top-line figure that removes traffic acquisition costs that is closely compared with consensus estimates. The current estimate is $1.21 bln with estimates running as high as $1.24 bln.
- For the past two quarters, Yahoo! did not provide guidance given Ken Goldman's brief tenure as CFO of the company to that point. Historically, Yahoo! has provided revenue guidance for the ensuing period. It's not clear whether Mr. Goldman will reinstall that policy or make any adjustments to the way Yahoo! has traditionally reported its future outlook.
- 04/13: According to a post on Barron's, Yahoo! shares could rise 25% from current levels as CEO Marissa Meyer, driven in part by expansion into mobile, and possibility of an Alibaba IPO, and improvements to its underlying businesses. Brett Harriss of Gabelli & Co. reportedly carries a Buy rating and a $33 price target, based on part on low valuation and improving fundamentals.
- 04/12: JP Morgan Chase raised its price target on Yahoo! from $22.0 to $26.00 ahead of Tuesday's earnings release, according to a post on Benzinga.com. The positive view is based on possible upside from Search and value of its Alibaba stake. However, the firm noted it also awaits improvements in the core business to move off its Neutral rating.
- 04/09: A report on WSJ.com suggested Apple (NASDAQ:AAPL) may be pursuing a deal with Yahoo! to get more of its products on the iPhone as part of a more cooperative alliance.
- 03/21: Oppenheimer raised Yahoo! to an Outperform, according to a report on Benzinga.com, based on the value of Yahoo! Japan, its Alibaba stake, and improving fundamentals. The price target was raised from $22 to $27.
Yahoo! shares are up more than 50% since early September, en route to the highest level since 2008. Given the recent strength, earnings will be watched closely for signals that the underlying business is seeing some improvement. Should results exceed estimates, look for a breakout to fresh all-time highs, with little resistance in sight. Conversely, support is at $23.00, with downside risk to the 50-Day SMA near $22.00. (Chart courtesy of StockCharts.com)
Yahoo! shares are at a multi-year high in advance of the 1Q earnings release, with the company benefiting from restructuring efforts under the leadership of CEO Marissa Mayer, improving search revenues, the potential benefits of an Alibaba IPO, and the value of its stake in Yahoo! Japan. But with the shares at these levels, earnings will get careful scrutiny for evidence of organic improvements in the core business and proof that turnaround efforts are bearing fruit. Any missteps could prove costly for Yahoo! shares given the recent advance.
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