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Summary

  • YHOO-Improving metrics and slightly raised guidance.
  • ABABA-The multi-billion treasure trove.
  • What about YHOO core?

So, based on the pop in Yahoo (NASDAQ:YHOO) shares after the results last night and in pre-market trading this morning, pretty much every one can figure out that the company reported a good quarter, all in all.

YHOO reported revenues of $1.09 billion (ex-TAC), up from $1.07 billion a year ago. Analysts were expecting revenues of $1.08 billion, so a slight beat. However, if one looks at YHOO's trend since Q4 2012 of flat-lined revenues, it is definitely a step in the right direction, albeit a small one.

The company reported earnings of $0.38 per share, which were a penny ahead of analysts' estimates. Another small step in the right direction, no?

For Q2:14, YHOO is guiding revenues to a range between $1.06 billion and $1.1 billion or $1.085 billion, again slightly higher than Street consensus of $1.08 billion.

The company was also finally able to show an increase in ads and search. The company's display revenues, including display ads business, was up 2%, while search-based revenues were up 8.5% in the quarter.

All in all, I think YHOO gets a B-, and I give Mayer a C+, as her efforts at kick-starting growth seem to have begun paying off. Credit where credit is due!

What a genius move it turned out to be for YHOO, when the company invested in Alibaba in 2005. At the time, Alibaba was looking for a vaunted Silicon Valley player, and YHOO put in $1 billion in exchange for a 40% stake. Nice move, Filo/Wang.

Alibaba reported revenues of $3.06 billion, up 66% YoY, and profits of $1.35 billion, more than a double YoY, for the December quarter. That sort of net profit margin has to be the envy of every company on the face of the earth, no?

I think ABABA will price between $17-$19 at a market value of between $150-$200 billion, and end up higher by 50-100% on debut. At that price level, it will be irresistible to the majority of investors, unless the bankers muck it up.

The question is what happens to YHOO after the ABABA IPO?

The most important thing to remember is this important fact; at the moment, YHOO core is valued at close to zero, and that will be even more evident after ABABA comes public, so there is only upside from here on in.

Mayer has addressed that issue as well on the conference call. She said that the company is adding more professional content to attract users, and to that end, the company has hired big names like Katie Couric, Bobbi Brown et al. The company is also looking at adding higher quality video shows, and is also backing a Tom Hanks project to boot. The company is also focusing its efforts on mobile, where it has 430 mobile users.

So, all in all, things are moving in the right direction, albeit in baby steps, which is okay with me.

Source: Yahoo, Alibaba & Mayer- The Troika Come Through

Additional disclosure: Long YHOO calls, long ABABA via Yahoo (will also be applying for Alibaba)