Yahoo bears hone in on display weakness; bulls focus on Alibaba

"It's remarkable how bad" Yahoo's (YHOO -5.1%) Q2 ad sales figures were, says Pivotal Research's Brian Wieser. "Such are the problems when there is no head of ad sales." Marissa Mayer effectively took over the job after COO Henrique de Castro was fired (following a tumultuous stint) in January.

The 24% Y/Y drop in Yahoo's display ad prices (much worse than Q1's 5%) is getting a lot of attention. Soft demand for banner ads relative to other formats (search, video, native ads) is seen as a culprit, as are delays in rolling out Yahoo's Ad Manager Plus ad-buying platform.

Marissa Mayer mentioned on the CC (transcript) Yahoo "took extra time to ensure [Ad Manager Plus] was delivering for our advertisers," during which time activity on the older Genome platform slowed. She added Yahoo saw a "lower-than-expected contribution from premium advertising, resulting in an unfavorable mix shift."

On the bright side, Mayer stated both mobile search and display ad sales more than doubled Y/Y. Yahoo's new Gemini platform (integrated mobile search and native ad purchases) now accounts for half of its U.S. mobile display revenue.

Sell-side bulls argue Yahoo's business challenges are priced in, and that investors should keep their focus on Alibaba. MKM estimates Yahoo's Alibaba stake is worth $29/share, and expects Alibaba's IPO roadshow to boost investor enthusiasm.

CFO Ken Goldman says Yahoo expects its Alibaba IPO share sale (now just 140M shares) to be "fully taxed," but is still exploring "tax-efficient structures" for the rest of its stake.

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Comments (8)
  • User7766461
    , contributor
    Comments (158) | Send Message
    "home in on"
    16 Jul 2014, 06:58 PM Reply Like
  • jmjjmj1
    , contributor
    Comments (183) | Send Message
    hone is correct
    16 Jul 2014, 07:58 PM Reply Like
  • Blue22
    , contributor
    Comments (449) | Send Message
    Instead of the shorters ripping Yahoo apart it might be more profitable to support the tiny sliver YHOO has brilliantly acquired of the Alibaba monster, which will inevitably change World business structures.


    It seems to be a great game for anti American market investors to trash our businesses in every way possible. Not all of us are as ignorant as our current government and are waiting for some pay-back in 2016!
    16 Jul 2014, 08:15 PM Reply Like
  • Guy in Ithaca
    , contributor
    Comments (428) | Send Message
    Yahoo's eighteen percent stake in BABA will likely be worth $36+/share in short order. Add Yahoo's stake in YAHOY, cash from 140,000,000 shares at BABA IPO, cash already on hand, and the core business and revenue such as it is and Yahoo! Is WAY undervalued at $34/share. A cold, hard look says YHOO is a buy.


    YHOO may even be an extremely good buy. BABA could end up being huge.


    It will be interesting to see how this plays out.
    16 Jul 2014, 09:39 PM Reply Like
  • s985714
    , contributor
    Comment (1) | Send Message
    "CFO Ken Goldman says Yahoo expects its Alibaba IPO share sale (now just 140M shares) to be "fully taxed," but is still exploring "tax-efficient structures" for the rest of its stake."


    This CFO should be fired! Mr Goldman should have known the share sales is imminent and is now still exploring ways to reduce tax. What an effective CFO and what an effective organisation. No wonder the result of the company is plummeting.
    17 Jul 2014, 07:42 AM Reply Like
  • stockbuyer2014
    , contributor
    Comments (133) | Send Message
    Yahoo is worthless right now, making it undervalued
    17 Jul 2014, 09:21 AM Reply Like
  • cspettham
    , contributor
    Comments (13) | Send Message
    Alibaba's F1 filing indicated its fair value per share as follows:


    For the three months ended


    Fair value per share
    June 30, 2011
    September 30, 2011
    December 31, 2011
    March 31, 2012
    June 30, 2012
    September 30, 2012
    US$13.50 – US$15.50
    December 31, 2012
    March 31, 2013
    June 30, 2013
    US$15.50 – US$18.50
    September 30, 2013
    US$18.50 – US$22.00
    December 31, 2013
    US$22.00 – US$25.00
    March 31, 2014
    US$25.00 – US$40.00
    June 30, 2014 (up to May 6, 2014)
    US$40.00 – US$50.00


    May 07 -August: US$50-US$60??????????
    September IPO Price: ????????????


    Based on Baba's valuations, Yahoo is definitely undervalued. YHOO is a buy!
    17 Jul 2014, 05:14 PM Reply Like
  • paulmathai
    , contributor
    Comment (1) | Send Message
    Yahoo is definitely a buy considering the Alibaba ownership, just wait till Ali IPOs and then see the price soar.
    19 Jul 2014, 04:47 PM Reply Like
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