Rob Zenilman submits: Piper Jaffray (PJC) senior research analysts Safa Rashtchy and Aaron M. Kessler sent a “Hot Comment” to clients in the wake of Yahoo's (YHOO) warning yesterday. The analysts see yesterday’s 11.2% sell-off as presenting a buying opportunity. Excerpts follow:
YHOO 1-year chart:
- Q3 Tracking to Low End of Guidance. … ($1,115M-$1,225M in revenue and EBITDA of $445M-$505M) with weaker than expected advertising spend…
- Auto Advertising Slowdown Appears to Be Short Term. …we believe the slowdown in auto advertising referenced by Yahoo is primarily a seasonal effect and we would expect a reacceleration in Q4 and 1H07. …our checks indicate 30%-35% growth expectations for 2007.
- Panama Investment Could Be Impacting Near-Term Search Monetization. …engineering resources were pulled …to work on the company's upcoming Panama search platform release … Yahoo should resume monetization improvements with the release of Panama in Q1.
- Sell-Off Creates a Buying Opportunity. …the Yahoo sell-off …creates a buying opportunity …Yahoo currently trades at 9x our current 2007 EBITDA despite conservative EBITDA estimated growth of 23%. We maintain our Outperform rating (Our Price Target is $36, based on 15x 2007E EBITDA).