Earnings Preview: Yahoo

Yahoo (YHOO) is expected to report Q2 earnings after market close today (Tuesday) with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 12c for EPS and $1.37B for revenue, according to First Call.

Analyst Views

Lately, analysts say that expectations are so seriously dampened for Yahoo because the company has been so seriously distracted by trying to fend off Carl Icahn and Microsoft (MSFT).

Citigroup's Mark Mahaney published his "cheat sheet," which is always helpful. He said that GAAP EPS north of 10c would be considered positive, below 9c would be negative. Mahaney estimates 8c. In terms of revenue, north of $1.38B would be good; south of $1.37B would be bad. Mahaney expects $1.38B. Looking towards guidance, Mahaney said that full year guidance above $7.6B would be good; south of $7.5B would be bad. He's expecting $7.49B. Other metrics to watch include -- owned and operated display ad revenue should grow between 12% and 15% YoY, O&O gross search ad revenue up between 16% and 18% YoY, and fees revenue should be around $220M.

The consensus thought is that Q2 is likely to be a non-event given the negative pre-releases from Valueclick (VCLK) and Bankrate (RATE), which highlights the weakening fundamentals in the ad network and comparison shopping businesses. General thinking is that fundamental results are likely to be soft, due to the recession, increased competitive pressures, and execution challenges. Thomas Weisel said the early read on July suggests Q3 could degrade further relative to Q2 results. The firm has been hearing from agencies that online display budgets are occasionally getting cut and that spending, when it does occur, can be unpredictable and lumpy.

But Yahoo remains primarily an event stock related to a potential transaction with Microsoft, Time Warner's (TWX) AOL unit, or possibly News Corp (NWS). Key upcoming events: July 24th Microsoft Investor Day and the August 1st Yahoo! Shareholder Day.

Comments

[N.Venkatraman]

I think the real new information will be when we know what the Board composition will be and how Yahoo creates a credible business model to compete against Google. Today, it needs to be just above the expectations and the stock may move a bit up after hours. I do not see the stock moving anywhere significantly higher until we get clarity on long term strategy. As long as it does not disappoint seriously, Yahoo may be able to dodge the current quarter performance. Look at how Google got hit... So, the expectations are low for Yang & Co. in the short term.

[Calvin C.]

Seems like tech stocks get slammed even with modest earnings. Remember RIMM's 1 cent shortfall causing it to crash 20%+? Same thing with GOOG & AAPL.

[DividendGrowthInvestor]

I think that people are way too bearish on yahoo and that it would go higher after hours no matter what happens.
LEt's see if I am correct!

[quem]

yall are smoking crack if you think that yang & decker woke up this morning with a clue about how to run a multi billion dollar company, any kind of semblance of strategy, how to thwart to serious brain drain exodus. I say crash baby, crash...I'll be there at $11/share which give the magnificent accumulations and continuation of blunders is where it should be valued!

[distressedvolatility]

YAHOO is pegged at $30 to $40 based on future cash flow multiples and hidden asset realization.. I think $37 sounded like a good number, combining microsoft and yahoo will make it a strong company able to double/triple cash flows...