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Yahoo Q4 2014 Preview: Looking For Tax Efficiency; Mobile/Search Near-Term CatalystsWestEnd511 • Today, 4:51 PM
- Yahoo reports after-market on Tuesday, with the market putting greater focus on the tax efficiency of Asian assets.
- Mobile and search are the near-term drivers, given YHOO's strength in vertical sites.
- Remain bullish on YHOO.
On The Bright Side: Yahoo! Rolls Ahead In Video Advertising
- Large tech incumbents are paying up major dollars for ad-tech assets.
- The Yahoo!-BrightRoll deal shows that large tech values scalability in the buy vs. build decision tree.
- Video platforms are drawing the most dollars and interest. Operators must show cross-device capability.
New Reason Appears For Yahoo Investors To Fear Alibaba's Business Structure
- Much of Yahoo's value still ties into its ownership of Alibaba's stock.
- Foreign ownership issues of Chinese securities came into question recently, possibly snaring major U.S. institutional investors.
- This brings up the issue of the corporate structure of Alibaba and its VIE issues.
- This article looks back at some of the considerations of VIEs and finds reason to be concerned about them.
- In addition, both Yahoo and Alibaba have been seeing declining EPS estimates, and as high P/E stocks, that topic also is problematic for investors.
- Like many companies, Yahoo must deal with persistent activist pressure.
- Starboard Value owns shares of both Yahoo and AOL, and thinks the two should merge.
- In its latest letter, Starboard urges Yahoo not to make the mistake of being too hasty to dump its Alibaba stake.
- Starboard warns the Internet company to not buy a media company.
Yahoo 2015 Outlook: Mobile Monetization And Tax Efficiency In Focus
- Mobile monetization and tax efficiency will likely dominate YHOO's headlines heading into 2015.
- Yahoo's presence in niche verticals remains compelling and offers a wide variety of monetization potentials.
- One point in tax reduction is equivalent to ~$400 million in tax saving. Such capital could be used to pursue accretive M&A to strengthen its niche verticals.
Mobile Advertising Is Yahoo's Biggest Tailwind In 2015
- Yahoo’s great run this year is not only due to Alibaba’s IPO. Investors also appreciate Yahoo’s emergence as a serious mobile advertising player.
- Yahoo management needs to imitate LinkedIn’s strategy in China.
- Acceding to play by the rules of Chinese censors will greatly improve Yahoo’s chances of grabbing significant share in China's ad business.
Yahoo: Three Major Growth Catalysts Going Into FY 2015
- Yahoo's equity interest in Alibaba will increase in value in FY 2015, and by estimates will be worth $56 billion.
- The core search business has better growth prospects, as a result of closing a deal with Firefox.
- Search revenue may increase to $4.32 billion, assuming users keep Yahoo as the default search engine.
- Native ads should drive financial performance, as they tend to perform better on a cost-per-impression basis.
- Yahoo Search may become Safari's default search engine.
- This puts Google in a tough position as it continues to battle anti-trust issues in Europe.
- Microsoft will also benefit as it shares 12% of Yahoo's search revenue.
- Following the Firefox deal, and assuming Yahoo can also get Safari, Yahoo may become the best play on Search going forward.
- Yahoo's assets and cash are a good hedge against downside risk.
- Yahoo's position in Alibaba has given it a lot of breathing room. It should carefully let its strategy unfold in 2015.
- Yahoo may still appreciate further if it continues to land big deals such as the new partnership with Mozilla Firefox.
Can Mayer Successfully Transition Yahoo: An Analysis Of Her Mobile-Centric Strategy And An Algorithmic Forecast
- Yahoo stock has more than tripled due to the company’s investment in Chinese e-commerce giant Alibaba.
- Yahoo has acquired new startups to enter new growth markets in online advertising.
- Yahoo is trying to find a tax-free way to return remaining investment in Alibaba to shareholders.
- I Know First algorithm correctly predicted stock price increase in June 30th article and forecasts a future bullish signal for Yahoo stock.
- Firefox will make Yahoo its default search engine.
- Yahoo's search business may undergo a significant period of growth, assuming factors such as pricing and the total number of ads sold increase significantly.
- When conservatively estimating the impact of Firefox, paired with growth in pricing, the search business may grow from $1.8 billion to more than $4 billion in revenue over the next three years.
Yahoo-Mozilla Deal Likely Worth Billions For Yahoo
- Yahoo's search engine will soon be the default search for Firefox, which currently controls 14-19% of the browser market share.
- I estimate that this deal will add $2-2.7 billion of revenue to Yahoo per year, and $2.3-3.1 billion if Yahoo terminates its search engine deal with Microsoft next year.
- Yahoo may be able to capitalize further on this tremendous opportunity by increasing Firefox usage through promotion on its web page.
- YHOO is suitable for Enterprising Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is fairly valued at the present time.
- The market is implying an 11.28% earnings growth over the next 7-10 years, within a margin of safety relative to the rate the company has seen in recent years.
Yahoo's Acquisition Of BrightRoll Highly Accretive Over The Next 5 Years
- Yahoo acquired BrightRoll, a programmatic ad buying platform, which is distinct from a real-time bidding exchange.
- Programmatic ad buying is expected to grow at a fairly high rate as advertisers re-appropriate marketing budgets for targeted ad-buying across publishers.
- The $640 million acquisition offers meaningful upside prospects, as video advertising is expected to take off along with programmatic ad-buying.
Update: Yahoo's Acquisition Of BrightRoll Is A Significant Step In The Right Direction
- Yahoo has been looking to double down on video advertising, and has confirmed it is buying BrightRoll.
- This acquisition supports my original thesis that Yahoo would need to acquire video ad technology to succeed.
- This acquisition means that Yahoo will likely not acquire AOL.
Yahoo Eyes Video Ad Dollars With BrightRoll Acquisition
- This acquisition can catapult Yahoo to a No. 1 position in terms of the number of ads served in the US.
- BrightRoll leads the video ad tech industry, and continues to dominate over some of the top ad tech platforms such as LiveRail and Adapt.tv.
- Video online ad spending is expected to exceed $12.71 billion by 2018.
Today, 5:35 PM
Fri, Jan. 16, 2:23 PM
- Prashant Fuloria, formerly the product chief at mobile ad/analytics firm Flurry (acquired by Yahoo last summer), will now oversee all of Yahoo's (YHOO +0.4%) ad products, according to a memo from Marissa Mayer.
- Scott Burke, Yahoo's long-time SVP of ad technology, will report to Fuloria. As will Tod Sacerdoti, the founder/CEO of recently-acquired video ad platform BrightRoll. Fuloria will report directly to Mayer.
- The shakeup comes ahead of Yahoo's Jan. 27 Q4 report. The company's display ad revenue, hurt by share loss to Facebook/Google and a transition to native ad formats (e.g. news stream ads) from traditional banner ads, fell 6% in Q3 to $396M. Search ad revenue rose 6% to $450M.
Thu, Jan. 8, 11:39 AM
- Though Marissa Mayer (NASDAQ:YHOO) is reportedly uninterested in a deal and Tim Armstrong (NYSE:AOL) has dismissed the M&A speculation swirling around his company, activist Starboard Value is once more reiterating its call for a Yahoo/AOL merger.
- Starboard argues a merger would yield cost synergies of $1B-$1.5B/year, help Yahoo carry out "a tax-efficient separation" of its Alibaba/Yahoo Japan stakes, and create "a strong growth platform given AOL's progress in mobile and video advertising."
- The firm also says it's "increasingly concerned" about reports stating Yahoo is thinking of making a big media acquisition with its Alibaba IPO proceeds. In addition, it's not happy with speculation Yahoo is "considering a cash-rich split-off as a structure to separate its non-core minority equity interests," rather than "a spin-off structure or other available alternatives to unlock the full value of the stakes in Alibaba and Yahoo Japan."
- Yahoo has said it will offer more details about its plans to tax-efficiently monetize its remaining Alibaba stake during its Q4 earnings CC (set for Jan. 27).
- Both Yahoo and AOL are rallying. The Nasdaq is up 1.7%.
Thu, Jan. 8, 4:43 AM
- "There's always speculation around us because we have taken a company that was not doing well and ended 2014 with two straight years of growth," announced AOL (NYSE:AOL) chief executive Tim Armstrong, dismissing talks of possible mergers.
- The company had recently been linked to rumors of a possible joint venture with Verizon (NYSE:VZ) and a merger with Yahoo (NASDAQ:YHOO).
- Previously: Verizon CEO throws cold water on AOL acquisition rumor (Jan. 06 2015)
Thu, Jan. 8, 3:16 AM
- Google’s (NASDAQ:GOOG) slice of the U.S. search market, excluding mobile devices, fell to 75.3% last month from 77.5% in November, while Yahoo's (NASDAQ:YHOO) share jumped to 10% from 8%, according to analytics firm StatCounter.
- The changes were spurred by a deal in November where Yahoo replaced Google as the default search engine on Firefox browsers in the U.S.
- Google is also facing potentially larger losses on mobile devices amid reports that Apple is considering dropping it as the default search provider on its Safari browser.
Tue, Jan. 6, 2:05 PM
- A fresh rumor that Carl Icahn is buying a stake in Twitter (NYSE:TWTR) has led shares to rally in spite of a broad market selloff. An Icahn/Twitter rumor also broke out in 2013.
- Yahoo-related speculation might also be helping Twitter's cause. Ex-Yahoo CEO Ross Levinsohn declared on CNBC Twitter should acquire Yahoo's (NASDAQ:YHOO) core business - most of the company's market cap is tied to its Alibaba/Yahoo Japan stakes - and SunTrust's Bob Peck offered ten reasons why he thinks a Yahoo/Twitter merger makes sense.
- Among Peck's arguments: Twitter could integrate its display and mobile ad platforms with Yahoo's; both companies claim strong news, sports, finance, and entertainment audiences; Twitter's short-form content could be matched with Tumblr's longer-form material; and Twitter's interest graph data could be paired with Yahoo's demographic data for ad targeting purposes.
- In terms of growth profiles and valuations, Twitter and core Yahoo are very different entities.
Fri, Jan. 2, 9:35 AM
- "For sure, [Marissa] Mayer and Yahoo (YHOO +0.3%) considered acquiring Scripps Networks (SNI +2.7%)," writes BI's Nicholas Carlson, citing two sources. He also reports hearing from a media industry source there were "pretty active" rumors during the summer that Yahoo, which just received an Alibaba IPO windfall, wanted to buy CNN (NYSE:TWX).
- Carlson, whose critical NYT Magazine column on Mayer (adapted from a new book) has drawn plenty of attention, reports Yahoo initially entered into talks with Scripps to acquire The Food Network, and that "the possibility that Yahoo might acquire all of Scripps" later entered into the discussion. Aside from The Food Network, Scripps owns the Travel Channel, HGTV, and DIY Network.
- Among the reported reasons for Yahoo's interest in Scripps: Many of its media brands cater to women "25 or 35 and older" (a key Yahoo demographic); Scripps has very brand advertiser-friendly content; Yahoo could distribute its original content across Scripps' platforms; and Yahoo's salesforce could offer joint TV/Web ad packages.
- A deal for The Food Network alone is arguably more plausible than one for the whole of Scripps, given: 1) Scripps has a $10.6B valuation, and could cost several billion more to acquire. 2) Yahoo hasn't made any giant media acquisitions during the Mayer era, and has instead focused its content investments on financing original material and hiring well-known media personalities (such as Katie Couric and David Pogue).
- Update: Variety reports Yahoo has "mulled buying Food or other Scripps properties internally," but adds the company "has not — either formally or informally — ever [approached] SNI about a potential deal."
Dec. 29, 2014, 3:08 AM
- Yahoo (NASDAQ:YHOO) is targeting the growth of wearables and other mobile devices to cash in on their expected exponential future growth, FT reports.
- The company has already broken into the wearable market with its version of Yahoo News Digest for the Apple Watch.
- In addition to its development of apps for mobile devices, Yahoo has not ruled out creating its own wearable, says Adam Cahan, senior vice-president of mobile.
Dec. 23, 2014, 7:07 PM
- Yahoo's (NASDAQ:YHOO) $1.1B acquisition of Tumblr is looking like a "home run" purchase, argues Topeka's Victor Anthony, hiking his target by $3 to $60 and reiterating a Buy.
- Anthony cites a slew of positive metrics. "As of 3Q, Tumblr had 420M users (+40% since purchase), some of which are logout-out users, and the number of registered blogs is now 215.6M, up from 105M at purchase. Monthly mobile users are growing 50% YoY and time spent of registered users has grown from 22 minutes to 28 minutes."
- He adds over 260 brands are now spending on Tumblr, and that the blogging platform "over-indexes on teens relative to other social media platforms." Yahoo stated on its Q3 CC Tumblr is expected to have 2015 revenue of over $100M, and generate positive EBITDA.
- Meanwhile, a weekend NYT Magazine column (adapted from a new book) by Nicholas Carlson on Marissa Mayer's time at Yahoo continues to draw attention. Among other things, Carlson offers a critical view of Mayer's hiring practices and media/ad skills, and of her perceived attempts to run Yahoo as a growth company rather than as an established, slow-growing, tech firm.
- Yahoo fell 2.2% in regular trading, thanks to Alibaba's 3% drop.
Dec. 12, 2014, 10:54 AM
- Hortonworks (NASDAQ:HDP) opened at $24 and is now at $24.13, up 50.8% from its $16 IPO price.
- Hortonworks, one of the two most prominent developers (along with Intel-backed Cloudera) of software distributions for the Hadoop big data framework, is now worth just over $1B, or ~15x gross billings from the 12 months ending Sep. 30.
- Yahoo's (YHOO +1.1%) 7.6M-share (16.8%) stake is worth $183M. Teradata's (TDC -1.4%) 2.9M-share (7%) stake is worth $70M.
- Prospectus, IPO analysis
- Prior Hortonworks coverage
Dec. 5, 2014, 9:16 AM
- While downgrading Google to Neutral, BofA/Merrill's Justin Post has upgraded Yahoo (NASDAQ:YHOO) to Buy, and hiked his target by $7 to $62.
- Post: "While Yahoo continues to lose US online ad share (from 7% in 2013 to 6.2% in 2014E and 5.6% in 2015E), we are upgrading Yahoo to Buy from Neutral based on Alibaba and tax upside potential."
- He adds CFO Ken Goldman has suggested Yahoo remains optimistic about "finding a promising tax solution" for monetizing its remaining 384M-share Alibaba stake (previous), and plans to detail its plans during its Q1 earnings call.
- Yahoo's Alibaba stake currently has a pre-tax value of $41.9B. Several firms hiked their targets in November.
Nov. 26, 2014, 4:53 AM
- Netflix (NASDAQ:NFLX) is suing its former vice president of IT operations Mike Kail, who left the company in August to become chief information officer at Yahoo (NASDAQ:YHOO).
- The suit says that Kail arranged Netflix contracts with IT service companies Vistara and NetEnrich, and then pocketed commissions of 12%-15% of the monthly fees Netflix paid each company.
Nov. 25, 2014, 1:13 PM
- The Information reports Yahoo (YHOO - unchanged) and search partner Microsoft (MSFT +0.5%) are aggressively trying to sell Apple on replacing Google (GOOG +0.6%) as the default search engine for the Safari browser (pre-installed on all iOS/Mac OS hardware) when its Google deal expires in 2015.
- Apple, which naturally views Google as a major rival, already dropped Google as iOS and Mac OS' Spotlight search provider this year in favor of Bing. Yahoo, meanwhile, is less than a week removed from announcing it has displaced Google as Firefox's default U.S. search provider; Google is still the default provider in Europe.
- The Firefox deal suggests Google is willing to walk away from default search agreements if Yahoo/Microsoft (hungry to grow their scale) significantly undercut its revenue-sharing terms, betting much of its base will keep using Google regardless. Macquarie has estimated Google provides Apple with a 75% cut on Safari-driven iOS search ad revenue.
- On iOS, users could keep relying on Google search in the event of a Yahoo deal by manually selecting Google as their Safari search option (should Yahoo become the default), or by using Google's popular search and Chrome apps. StatCounter estimates Google had a 92.2% October mobile/tablet search share to Yahoo and Bing's combined 6.5%.
Nov. 25, 2014, 3:38 AM
- Yahoo's (NASDAQ:YHOO) new move to begin selling canvas prints of Flickr photos is stirring controversy within the Flickr community.
- Yahoo said last week that it would begin selling the prints of 50M Creative Commons-licensed images as well as an unspecified number of handpicked photos from Flickr.
- For handpicked photos, the company will give 51% of sales to their creators, but Yahoo will keep all of the revenue for sales of Creative Commons images.
- Many contributors are not happy about the new move, while other amateur photographers are pleased by the new publicity.
Nov. 19, 2014, 5:20 PM
- Per the terms of a new 5-year deal with Mozilla, Yahoo (NASDAQ:YHOO), whose search engine is powered by Bing (NASDAQ:MSFT), will provide "the default search experience for Firefox in the United States on mobile and desktop." The deal also "provides a framework for exploring future product integrations and distribution opportunities to other markets."
- No word on revenue-sharing terms. Google (NASDAQ:GOOG) has long been Firefox's default search provider. Google's deal was last renewed in 2011, apparently on more favorable terms to Mozilla.
- Though its browser share has fallen in recent years, thanks to both Chrome's gains and a relatively weak mobile position, StatCounter estimates Firefox still has a 12% combined PC/mobile/console browser share globally. Chrome's share is at 41%, and Internet Explorer's at 13%.
- StatCounter puts Yahoo and Bing's combined global search share at just 7.4%. However, comScore puts their combined U.S. PC search share at 29.8%.
- YHOO +0.8% AH.
Nov. 19, 2014, 4:11 PM
- Yahoo (YHOO) "has been ferreting away over the past few weeks on several more big acquisitions, largely aimed at helping its flagging display business," Kara Swisher reports. Well-funded ad tech startups MediaMath, RadiumOne, and Turn are reportedly among the targets being considered.
- All three companies operate in the fast-growing market for programmatic (automated) ad buys, which presents challenges for Web publishers such as Yahoo to go with opportunities. RadiumOne was once believed to be hatching IPO plans.
- The ink is barely dry on Yahoo's $640M deal to buy video ad tech platform BrightRoll, whose advertiser-facing solutions include a programmatic buying platform. Four months ago, Yahoo struck a deal to buy Flurry, a provider of mobile analytics tools and an in-app ad network.
- Swisher also reports Yahoo has hired consulting giant McKinsey and "a spate of banks" (including Goldman and JPMorgan) to advise it as it continues exploring options to tax-efficiently monetize its Alibaba/Yahoo Japan stakes.
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