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Yahoo +7.5% AH on Alibaba numbers, guidance, display turnaround

  • Yahoo (YHOO) discloses in its earnings slides (.pdf) Alibaba (ABABA) had Q4 revenue of $3.06B (+66% Y/Y), and net income of $1.35B (+110%). Revenue growth accelerated from Q3's 51% clip.
  • Yahoo Japan's sales fell 14% Y/Y in Q4 to $1.03B (worse than Q3's 4% drop), and its net income fell 11% to $304M.
  • Yahoo itself is guiding for Q2 revenue of $1.12B-$1.16B, above a $1.08B consensus. Op. income is expected to fall to $130M-$170M from a year-ago level of $224M, and adjusted EBITDA to $290M-$330M from $386M.
  • Yahoo's long-struggling display ad ops staged a turnaround in Q1: Sales (ex-TAC) rose 2% Y/Y to $409M after falling 6% in Q4 and 7% in Q3. Search revenue (ex-TAC) rose 9% to $444M after growing 8% in Q4. All other revenue fell 11% to $234M.
  • Display ads sold +7% vs. +3% in Q4, price per ad -5% vs. -7%. Search paid clicks +6%, down sharply from Q4's +17%. But price per click rose 8% after dropping in each quarter of 2013. Did Henrique de Castro's firing contribute to the display/search improvement?
  • $450M was spent on buybacks, up from $231M in Q4 and boosting EPS. While revenue rose 0.9% Y/Y, opex rose 15.5% to $1.1B.
  • Q1 results, PR
Comments (32)
  • name999
    , contributor
    Comments (162) | Send Message
     
    Alibaba is just a monster. The 2014 Q1 ER of Alibaba will give you another skyrocket number. This the most valuable thing Yahoo has in its portfolio.

     

    Also, Yahoo will start to show turnaround signs in its own core businesses in the 2nd half of the this 2014 per the management team's expectation.
    15 Apr, 04:43 PM Reply Like
  • Investor RayRay
    , contributor
    Comments (17) | Send Message
     
    This definitely gives me confidence that Alibaba will IPO at the higher end of estimates ($150B+) which will be huge for Yahoo. Also remain confident that Yahoo will have a successful turnaround of core business which will be further bolstered after the cash flow from Alibaba IPO in 3Q.
    15 Apr, 04:47 PM Reply Like
  • sfinvestor
    , contributor
    Comments (961) | Send Message
     
    transformative change in Yahoo and sign of a turnaround. Sort of reminds of FB when it was in the 20's and prompty went to the 30's upon revelation that mobile ad is working.
    15 Apr, 04:49 PM Reply Like
  • Pete P.
    , contributor
    Comments (645) | Send Message
     
    These numbers were fantastic for Yahoo and Ali all around.

     

    Ali might do $8 billion in net income for 2014. At 30 PE, that's $240 billion market cap.
    15 Apr, 04:58 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (8589) | Send Message
     
    Yahoo!

     

    But from tomorrow onwards, Mr. Putin will see to get the crash going proper : (
    15 Apr, 04:59 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5595) | Send Message
     
    Forbes looks closer at Marissa Mayer and how she has failed to lead Yahoo to long overdue growth. Plenty of spending by Mayer, little to show for the money being spent.
    Plenty of stocks to invest in that are making money. Yahoo is not.

     

    http://onforb.es/1jIJCxm
    15 Apr, 05:09 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (8589) | Send Message
     
    Don't be so sad you missed profiteering from Yahoo! since 2012. Your time will come also.
    15 Apr, 05:15 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5595) | Send Message
     
    Read the Forbes article. I didn't write it, I just provided a link to what others are saying about Mayer and Yahoo.

     

    When I tell any truth, it is not for the sake of convincing those who do not know it, but for the sake of defending those that do. ~William Blake
    15 Apr, 06:07 PM Reply Like
  • Pete P.
    , contributor
    Comments (645) | Send Message
     
    Yahoo finally shows growth, something a lot of the naysayers couldn't be done, and there are still bashers now saying "It's not enough" or "It's too little."
    16 Apr, 09:55 AM Reply Like
  • Nettligent
    , contributor
    Comments (1351) | Send Message
     
    Yahoo is a 1001 lbs. gorilla and it takes time to turn around. So far so good and Yahoo must continue at faster pace to improve its core business, money will follow closely behind. Stop trying to impress Wall Street because they have no loyalty, only customers.
    Microsoft should reconsider its offer to buy Yahoo at current condition.
    15 Apr, 05:12 PM Reply Like
  • stockplaza
    , contributor
    Comments (580) | Send Message
     
    Definitely impressive numbers from Alibaba .. This is another confirmation that eTail / eCommerce is booming in China and China Internet stocks like VIPS YY ATHM VNET CCIH etc should benefit from Alibaba results.

     

    FB trades at 50x 2014 estimated EPS. But its EPS growth is no where near 110% that of Alibaba.

     

    If you give 50x 2014 estimated earnings of $8B to Alibaba, that will be $400B market cap ..

     

    Alibaba IPO should further help YHOO and other China Internet stocks, especially the performers like VIPS which consistently beat expectations in the last 8 quarters
    15 Apr, 05:16 PM Reply Like
  • sfinvestor
    , contributor
    Comments (961) | Send Message
     
    Aliabab made 1,364M in Q4 vs. FB's 520M

     

    Alibaba's growth rate is 66% vs. 50% for FB

     

    FB is valued at 152B, Alibaba should be at least 1.5X FB or 225B.
    15 Apr, 05:40 PM Reply Like
  • sfinvestor
    , contributor
    Comments (961) | Send Message
     
    another comparbable is Tencent 122B

     

    Q4
    YOY growth 40%
    net earnings 779M

     

    vs.
    YOY growth 66%
    net earnings 1,364M

     

    You can safely make the case that Alibaba is worth more than 225B here as well. (China Comp)
    15 Apr, 06:10 PM Reply Like
  • NYer1
    , contributor
    Comments (970) | Send Message
     
    Just imagine what would happen to AMZn stock when Ali will present a liquid alternative in the Eretail business.
    15 Apr, 06:01 PM Reply Like
  • abdullah999
    , contributor
    Comments (299) | Send Message
     
    I may be wrong but it doesn't appear that $YHOO is excessively cheap at $36.4 based on a SOTP valuation, unless it's core biz turns around or Alibaba's growth accelerates even further.
    15 Apr, 06:15 PM Reply Like
  • ryanstaylor
    , contributor
    Comments (4) | Send Message
     
    Yahoo cannot ride on Alibaba's coat tails forever.
    15 Apr, 06:29 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (8589) | Send Message
     
    Yes, that has to be kept in mind.
    15 Apr, 06:44 PM Reply Like
  • buyandhold???
    , contributor
    Comments (907) | Send Message
     
    it can until they liquidate their stake.....which they will hold 14% of for the near future
    15 Apr, 09:10 PM Reply Like
  • James Sands
    , contributor
    Comments (2088) | Send Message
     
    Just not sold, all the hype is surrounding Alibaba while Yahoo is estimated to grow 1.5 and 3% the next two years.....meanwhile, Google and Facebook continue to outperform significantly on advertising growth.

     

    Yahoo should consider cashing out Alibaba and paying a dividend if their growth story can't break 5%. This is where Apple is from a growth standpoint, however, Apple has a tad-bit more scale.

     

    Does anyone here believe that Yahoo should be equally valued with Google? This is where they are now in after-hours.

     

    Glad Yahoo is getting its margins more healthy, but long-term, much better opportunities are out there for investment considerations, especially for growth. Yahoo deserves an increased valuation, but not on par with Google and certainly not near a P/E at 30. High teens to low 20s is where Yahoo should be valued.
    15 Apr, 09:31 PM Reply Like
  • buyandhold???
    , contributor
    Comments (907) | Send Message
     
    not impressed? $1.5B in net profit in a quarter + 66% revenue growth + 110% profit growth + 50% margins? So ali baba is growing faster than amazon w/margins bigger than apple and that isn't impressive?????

     

    i wanna invest in what you're investing in
    16 Apr, 07:26 AM Reply Like
  • jonnie14
    , contributor
    Comments (101) | Send Message
     
    How are you figuring that yahoo is valued the same as google?
    15 Apr, 09:52 PM Reply Like
  • James Sands
    , contributor
    Comments (2088) | Send Message
     
    Just look at TTM P/E based on after-hours price ($36.55)....both companies are near 30xs TTM earnings. Yahoo is overvalued at the moment and any further gains are extra gravy...and not the good Thanksgiving kind either.

     

    I will say that if Yahoo can execute on the mobile side, maybe they can get growth going better. BUT (a big but) Yahoo's TTM revenues are still near 40% lower than 2008 levels. This is pretty poor when considering all other tech are growing at much more rapid rates.

     

    Every time we get an update on Yahoo, it is never unaccompanied by Alibaba. Yahoo has not achieved much change within revenue segments for any sustained period. If anything it has been the complete opposite over the past 12 quarters (declining growth). So 1% growth driven by their "other" category still leaves much to be proven, as search and display still continue to decline.
    15 Apr, 11:13 PM Reply Like
  • Borgert Brothers
    , contributor
    Comments (2) | Send Message
     
    Yahoo Japan stake: about $6B after tax
    Alibaba (assume $150b) 24% stake: $23.4 after tax
    Net working capital: About $3.3B
    P/E ratio of 30 market cap: (30*1.26) about $37.8B or about $37.80 per share
    Yahoo's earnings of $180M this quarter (average has been around $150M lately)

     

    So you are suggesting that the enterprise value of Yahoo, which has generated $150M income from operations per quarter is worth:
    37.8-6-23.4-3.3= $5.1B

     

    150M per quarter x 4= 600M * 35% tax= 390M.

     

    5.1B/390M= 13 P/E ratio.

     

    I just don't see how Yahoo could be considered over valued at 13x earnings. Not to mention it spends $1B+ on R&D each year..or about 20% of its enterprise value...surely that has to count for something.

     

    And yes, Alibaba must be mentioned with every report Yahoo produces because it is a way investors can gauge how Alibaba is doing, which ultimately benefits Yahoo because so much of its market value is derived from its investment in the Chinese behemoth. What company wouldn't want investors to see how its biggest investment is performing, especially with these numbers.

     

    Disclosure: I own yahoo for precisely the calculations shown above, 12 mo PT is $50
    16 Apr, 01:46 AM Reply Like
  • sfinvestor
    , contributor
    Comments (961) | Send Message
     
    "Just look at TTM P/E based on after-hours price ($36.55)....both companies are near 30xs TTM earnings. Yahoo is overvalued at the moment and any further gains are extra gravy...and not the good Thanksgiving kind either."

     

    @Jim

     

    Yahoo's valuation metrics get distorted by their equity interest in Yahoo Japan and especially Alibaba. It is not insignifcant as equity interest are bigger than Yahoo core.

     

    So yes based on Yahoo core alone, 30 PE is gravy? But what are TTM earnings for a company that doubled their earnings? A 150 PE?

     

    and whether you like it or not, Alibaba is the real reason there are so many Yahoo longs. The rest of the world wants to peek at Alibabas finace as well. It is a top 10 technology company in this world.
    16 Apr, 02:25 AM Reply Like
  • jonnie14
    , contributor
    Comments (101) | Send Message
     
    Even being fairly conservative with Alibaba numbers yahoo is cheap. I would like to see them increase their buyback plan once they get some cash from Alibaba stock sale.
    16 Apr, 10:20 AM Reply Like
  • Pete P.
    , contributor
    Comments (645) | Send Message
     
    jonnie, I was disappointed to see that they only spent $450 million to buy back stock in the first qtr.

     

    There seemed to be be plenty of huge volume days that they could have purchased a lot of stock.

     

    Now maybe there are some reasons:

     

    1. If they bought back more, earnings per share would have been inflated and comps would be tough for next year.

     

    2. They wanted to show slight growth and accelerate it later in the year.

     

    I would assume that Yahoo was buying back tons of stock in the first two weeks of April, since it dropped to low $30s.
    16 Apr, 11:06 AM Reply Like
  • James Sands
    , contributor
    Comments (2088) | Send Message
     
    I'm not saying Yahoo is a bad company, I'm just saying Yahoo's core business has way more to prove. They have struggled greatly post-recession when looking at competitive peers. Do Google or Facebook have lower revenues post-recession, consider other tech-related businesses such as Microsoft, Amazon, eBay, Netflix, LinkedIn, etc. Other tech companies have core businesses that have recovered and exceeded the recession.

     

    Yahoo initially owned 46% of Alibaba back in 2005. The company signed agreements with Softbank in the late 90s to create Yahoo Japan and only discloses a 35% stake as of 2011. These holdings have significantly more value and better growth (mostly Alibaba) than Yahoo does. So investors are going to be dependent on how Yahoo manages these investments moving forward to some extent.

     

    But as sfininvestor states, the action from these minority interests takes place below the revenues and operations, and really comes to light on the cash flow statements. So these are not the core drivers for Yahoo.

     

    Yahoo's earnings may improve, but in Q1 there were definitely higher costs and expenses. When we exclude the minority interests, Yahoo's free cash flow per share declined 64% year-over-year. Their operating margin declined from 16% to 3%. Their sequential TTM revenue growth improved from negative 6% to negative 5%. I'm more interested in what's under the hood, than the flashy looks of Alibaba.

     

    Yahoo's future earnings growth is not going to offer investors better long-term opportunities versus peers when revenues are growing below 5% per year. This is why Apple does not appreciate much and is paying a dividend instead.
    16 Apr, 11:24 AM Reply Like
  • jonnie14
    , contributor
    Comments (101) | Send Message
     
    Pete yes I am sure they have a plan for the buyback but would like to see more cash go towards a buyback for the shareholders. I also don't want to see them explore any areas but the core and mobile services. My fear is that they use their current and upcoming cash spreading themselves to thin.
    16 Apr, 11:58 AM Reply Like
  • sfinvestor
    , contributor
    Comments (961) | Send Message
     
    "I'm just saying Yahoo's core business has way more to prove. They have struggled greatly post-recession when looking at competitive peers. Do Google or Facebook have lower revenues post-recession, consider other tech-related businesses such as Microsoft, Amazon, eBay, Netflix, LinkedIn, etc. Other tech companies have core businesses that have recovered and exceeded the recession. "

     

    Yes, Yahoo's core business suck. That is not the reason why the stock went up from the teens to the thirties. That's why there were a several CEO changes prior to MM.

     

    At some point, Yahoo has to be more Google and show revenue growth. While this report was by no means a blockbuster, some of the key metrics are turning and you can see signs of growth and building a base. admittedly, I have no idea how strong their base is but I have no problem spending money to hire engineers and build products.
    16 Apr, 05:05 PM Reply Like
  • Nettligent
    , contributor
    Comments (1351) | Send Message
     
    Stock buyback, dividend, improve cash flows, and acquisitions are in motion with many different ways from different angles at Yahoo. These are hidden benefits so Yahoo does not have to pay huge taxes. Yahoo would rather pass on to shareholders and invest in future growth.
    Yahoo management is very conservative with their finance and CEO makes sure they do not waste capital, money, and resources.
    Absolutely no spending spree, only to optimize tax dollars within the laws and timeframe.
    16 Apr, 09:40 PM Reply Like
  • jonnie14
    , contributor
    Comments (101) | Send Message
     
    When did Apple start paying a dividend?
    16 Apr, 11:59 AM Reply Like
  • James Sands
    , contributor
    Comments (2088) | Send Message
     
    September 2012. Growth from 2011 to 2012 was 45%. For 2013, growth slowed to 9%, and forecasts for the next two years, 2014 and 2015 are 5.5% and 6.4% respectively.
    16 Apr, 12:12 PM Reply Like
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