I Wouldn't Touch Yahoo for Half Its Current Price

Eddy Elfenbein submits: Now that Yahoo’s (YHOO) Panama is showing early signs of success, Valleywag asks if it’s time to stop bashing the company:

It's surely the best news for Yahoo in a while, and we'd love, in principle, to find another big company to prod. But it doesn't change the basics: Yahoo makes less than half what Google (GOOG) produces in revenue for every search query; it needs much more than a one-off 10% lift in click-throughs if it is to challenge Google's strengthening grip on the search market.

The narrative remains the same. Yahoo wasted time schmoozing in Hollywood while allowing two Stanford students to build a better search engine. Google has eclipsed Yahoo. Terry Semel's failure is not absolute: Yahoo is growing much more strongly than most media companies. But it is relative. Yahoo, not Google, should have owned the internet.

Ouch. But it’s true. I don’t get how Yahoo is a $31 stock. I wouldn’t touch it for half that. Yahoo is going for 43 times 2008’s earnings; Google, just 25.

YHOO/GOOG 1-yr comparison chart

Comments

[oceandude:]

"One-off 10%"? I thought the point of Panama was that performance would continually improve as the system "learns" how to generate clicks most efficiently. It may be more like "starting at 10% with a high ceiling".

2007 Mar 26 02:27 PM