Earnings Preview: Yahoo

Jul.19.11 | About: Yahoo! Inc. (YHOO)

Yahoo! (NASDAQ:YHOO) is expected to report Q2 earnings after the market close on Tuesday, July 19, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 18c for EPS and $1.11B for revenue, according to First Call. Yahoo has delivered an average earnings surprise of over 16% in the last four quarters. Given the strong ad market, most analysts expect a moderate beat. Yahoo's story is also tied to CEO Carol Bartz's turnaround plan -- but things are going rather slow on that front.

Analyst Views

Think Equity expects Yahoo! to post in-line 2Q results, and expect a neutral stock reaction. The firm expects continued display strength offset by continued weakness in search. On the earnings call, Think Equity is looking for management to address key points including RPS improvements, discussion with Alibaba and SoftBank regarding Alipay transfer, and Yahoo Japan monetization. Think Equity continues to believe Yahoo is receiving very little value for its core business after subtracting cash and Asian investments. Their target of $20 for Yahoo is based on 6x 2012E EV/EBITDA multiples, plus approximately $2.70 net cash/share and $9.30 in Asian investments -- discounted at 35%. Consensus for Q3/FY11 is 19c/78c on $1.12B/$4.5B in revenue.