Higher Expectations for Yahoo’s Search Market Share and Search Revenues

| About: Yahoo! Inc. (YHOO)

Yahoo (NASDAQ:YHOO) competes with Google (NASDAQ:GOOG), AOL (NYSE:AOL), and Microsoft (NASDAQ:MSFT) in the search advertising market. We currently have a Trefis price estimate of around $19 for Yahoo’s stock, about 35% above the current market price of around $14.

Trefis members have created forecasts for two key drivers of Yahoo’s stock over the last week: (1) Yahoo’s Search Market Share and (2) Revenue per Search (RPS). The members’ forecast suggests that Yahoo’s Search Market Share and RPS trend slightly above the Trefis forecast. These projections indicate a combined upside of around 3% for Yahoo’s stock.

We estimate Search Advertising constitutes around 21% of the $19 Trefis price estimate for Yahoo’s stock. Hence the stock is quite sensitive to (1) Yahoo’s Search Market Share and (2) Revenue per Search. Below are charts showing recent estimates created by Trefis members for the two drivers in detail.

1. Yahoo’s Search Market Share

The average of forecasts for Yahoo’s Search Market Share created by Trefis members indicated a projected decrease from 10.2% in 2010 to 9.9% by the end of the Trefis forecast period, compared to the baseline Trefis estimate of a decrease from 9.8% in 2010 to around 9% by the end of the Trefis forecast period. The member estimates imply an upside of 2% to the Trefis price estimate for Yahoo’s stock. In the past, Yahoo’s Search Market Share has decreased from around 23% in 2003 to around 10% in 2009.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Yahoo’s stock to Yahoo’s Search Market Share.

Our complete analysis for Yahoo’s Search Market Share is here.

2. Revenue per Search

The average of forecasts for Revenue per Search created by Trefis members indicated a projected increase from around $8 per 1,000 searches in 2010 to around $10 per 1,000 searches by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from $7 per 1,000 in 2010 to around $8 per 1,000 by the end of the Trefis forecast period. The member estimates imply an upside of 1% to the Trefis price estimate for Yahoo’s stock. In the past, Revenue per Search has decreased from close to $15 per 1,000 in 2003 to around $8 per 1,000 in 2009.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Yahoo’s stock to Revenue per Search.

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