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- 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.
- Yahoo has moved considerably higher as a result of Alibaba.
- However, core business developments and the prospects of future capital returns make the investment opportunity extremely promising.
- On purely a tangible basis, Yahoo is worth $42.28 billion.
- However, after running an updated sum-of-the-parts analysis, the business should be worth $56 billion (conservatively).
- Various newer divisions of Yahoo are becoming profitable, presenting opportunities for future growth.
- The Display segment continues to struggle.
- Many of the new revenue drivers will demand attention in upcoming quarters.
- Recent events surrounding Yahoo have led it to be a very compelling investment for a variety of reasons.
- Sum of the parts analysis shows YHOO could be undervalued by as much as 40% with plenty of downside protection.
- Starboard reveals an interesting strategy that seems to coincide with Mayer's view from Q3 Earnings.
- Yahoo reported a phenomenal quarter and disclosed qualitative information that helps to quantify Yahoo's recovering search, display and native ad business.
- Earnings growth will come from mobile (native ads), share buybacks and strategic acquisitions.
- I believe that a combination of these three factors along with further upside in its Alibaba stake will drive the valuation premium significantly higher by the end of the year.
- Yahoo reported their quarterly earnings which was embraced by Wall Street.
- The shares have failed to trade above the BABA IPO high of $44 per share.
- I suspect the company's efforts to negate the tax effect will be futile.
Yahoo Earnings: Mobile, Windfall Profits From Alibaba Sale Boost Results
- The sale of Yahoo's 140 million shares in Alibaba boosted its cash position by $7 billion to $12 billion.
- While Yahoo's core search ad revenues (excluding TAC) improved by 6% year-over-year, its display ad revenues declined by 6%.
- The primary reason for growth in search ads revenue was the growth in the price per click.
Yahoo: Ignore The Headlines, The Q3 '14 Results Were Bad
- Yahoo reported Q314 numbers that generally beat estimates based on non-repeating items.
- Operations continue to show negative trends.
- A big jump in earnings from equity interests provided all of the upside that will drop going forward with the reduced investment in Alibaba.
Update: Yahoo Talks Taxes And Acquisitions On Q3 Earnings Call
- Yahoo reported higher than expected earnings on 3Q earnings call.
- CEO Marissa Mayer says company brought in tax experts to help minimize tag burden from sale of Alibaba shares.
- Mayer defended her acquisition strategy and said Tumblr would generate $100 million next year.
- This earnings call confirmed my arguments that Yahoo needed to minimize its tax burden and would need to get Tumblr generating revenue.
- YHOO 3Q14 beat on both EPS and revenue with guidance inline with consensus.
- The legacy business continues to experience a decline while search seems to have stabilized.
- The prospect of capital allocation could support the stock in the near-term. I prefer Google and Facebook among internet advertisers.
Wed, Oct. 22, 9:19 AM| 1 Comment
Tue, Oct. 21, 5:56 PM
- Yahoo (NASDAQ:YHOO) recorded a $6.3B Q3 post-tax gain related to its Alibaba IPO windfall. The company expects to pay $3.3B in cash taxes related to the sale Q1 2015.
- The company disclosed on its CC mobile was responsible for $200M of Yahoo's Q3 revenue (17% of total). It expects full-year gross mobile revenue (doesn't back out traffic acquisition costs) of more than 1.2B.
- Marissa Mayer predicts Tumblr (acquired last year for $1.1B) will produce over $100M in 2015 revenue, and generate positive EBITDA.
- YHOO +2.1% AH. Q3 results, guidance/details.
Tue, Oct. 21, 4:36 PM
- Yahoo (NASDAQ:YHOO) guides in its Q3 earnings slides (.pdf) for Q4 revenue (ex-TAC) of $1.14B-$1.18B, above a $1.17B consensus. Op. income is expected to fall to $190M-$230M from $330M a year ago.
- Buybacks provided a lift to Q3 EPS: $282M worth of shares were repurchased, and Yahoo entered into a $1.1B accelerated repurchase agreement under which it "prepaid $1.1 billion and received an initial delivery of approximately 15 million shares on September 30, 2014." A final settlement occurred on Oct. 17, through which $933M worth of shares were repurchased.
- The company previously promised to return at least half its Alibaba IPO proceeds (pre-tax value of $9.4B) to shareholders.
- Q3 display ad revenue (ex-TAC) -6% Y/Y to $396M, slightly better than Q2's 7% drop. Display ads sold +24%, but price per ad -24%; the transition to native ads from traditional banner ads likely contributed to both swings.
- Search ad revenue (ex-TAC) +6% to $450M, even with Q2's growth. Search click revenue (excludes Microsoft payments) +17%; paid clicks were flat, but price per click rose 17%.
- Americas revenue +2% to $831M; EMEA +2% to $81M; Asia-Pac -2% to $182M. Opex +6% to $1.05B.
- Q3 results, PR
Tue, Oct. 21, 4:07 PM
Tue, Oct. 21, 10:28 AM
- BrightRoll, long seen as an IPO candidate, offers video ad buyers a network of 21K+ sites and apps. It both directly sells to advertisers looking to run programmatic (automated) video ad campaigns across the network, and also connects with 3rd-party ad platforms such as Google's DoubleClick, AOL's Adap.tv, and Facebook's LiveRail.
- comScore estimates BrightRoll's network reached 155M U.S. users as of June. The company was reported last year to pulling in over $100M/year in revenue.
- TechCrunch reports hearing Yahoo (YHOO +1.3%) has signed term sheets with BrightRoll, and that a deal (if it closes) is likely to involve a ~$700M-$725M price.
- Yahoo, which just reaped an Alibaba IPO windfall, has been hungry to grow its video ad sales for some time. The company has signed a slew of video content deals and acquired streaming tech developer RayV, and is reportedly thinking of launching a YouTube rival (possibly while leveraging Tumblr)
- Fellow video ad tech provider TubeMogul (TUBE +2.5%) is rallying; its market cap is currently $398M
Mon, Oct. 20, 5:35 PM
Mon, Oct. 20, 2:29 AM
- Yahoo (NASDAQ:YHOO) is expected to outline cost-cutting efforts and give details of how it is evaluating possible acquisitions tomorrow, as the company faces pressure from activist investor Starboard Value.
- The struggling Internet business is considering buying one or more large technology start-ups with some of the $5.8B it made off of Alibaba's IPO.
- Acquisitions could trigger significant new streams of revenue at Yahoo, where sales have declined in four out of the past five quarters.
Tue, Oct. 14, 7:04 PM
- Washington Post chief revenue officer Kevin Gentzel is leaving to become Yahoo's (NASDAQ:YHOO) head of North American ad sales.
- News of Gentzel's hiring comes ahead of Yahoo's Oct. 21 Q3 report, and follows a Q2 in which Yahoo saw a 7% Y/Y drop in display ad sales.
- Gentzel will report to Ned Brody, hired from AOL a year ago to be Yahoo's Americas ad chief. COO/sales chief Henrique de Castro was fired in January following a rocky 15-month tenure.
Tue, Oct. 7, 2:04 PM
- Bloomberg and TechCrunch report Yahoo (YHOO -1.1%) is cutting 400 jobs (over 3% of its global workforce) at its Bangalore offices. Bloomberg adds over 40% of the affected employees have been offered positions in the U.S.
- Yahoo has confirmed the layoffs, but not their size. "We’re making some changes to the way we operate in Bangalore leading to consolidation of certain teams into fewer offices ... Bangalore remains an important office."
- The Indian cuts arrive a month after Yahoo shut down a Carlsbad, CA office, and laid off 59 employees. Activist Starboard Value wants Yahoo to implement much larger cost cuts to improve the profitability of its display ad/content ops.
- While cutting spending in some areas, Yahoo has been increasing it in others: The company's GAAP R&D spend rose 23% Y/Y in Q2, and sales/marketing spend rose 5%. More recently, AdAge reported Yahoo has reached out to ad agencies for a major branding campaign.
Fri, Oct. 3, 2:54 PM
- The WSJ reports Yahoo (YHOO +1.7%) is near a deal to invest in Snapchat at a $10B valuation through a new funding round. No word yet on how much Yahoo will be pouring in. The paper previously reported VC firm Kleiner Perkins will be taking part in the round.
- Snapchat's ephemeral messaging service now has 100M+ monthly active users, a figure that still puts it well below Twitter (271M at the end of Q2), WhatsApp (600M+), and several other peers. An ad service is set to launch later this year.
- A Snapchat deal arguably provides fresh ammo for Starboard Value, which has criticized Yahoo's M&A efforts and wants its Alibaba/Yahoo Japan stakes monetized and returned to shareholders. CNBC has reported Starboard wants Yahoo to spin off its core operations to enable a tax-efficient distribution of the Alibaba/Yahoo Japan stakes.
- Yahoo has thus far only promised to return "at least half" of its Alibaba IPO windfall (pre-tax proceeds of $9.4B) to shareholders.
- AOL (AOL +1.3%), which Starboard wants merged with Yahoo, has dipped slightly on the report, but remains up on the day.
- Update: In a less flashy move, Yahoo has reportedly acqui-hired struggling mobile messaging app MessageMe. TechCrunch hears the price was in the "double-digit millions."
- Update 2: The WSJ has updated its story. It now reports (citing one source) Yahoo is investing ~$20M.
Fri, Sep. 26, 6:03 PM
- Not surprisingly, Yahoo (YHOO +4.4%) says it will "review [Starboard Value's] letter carefully and [looks] forward to discussing it with them."
- Also not surprising: Yahoo says it has "great confidence in the strength of our business." The company promises to continue leveraging its "portfolio of world-class products which include Yahoo Search, Mail, News, Sports, Flickr, Tumblr, and advertising solutions among others," and to keep evaluating capital-allocation options.
- Fund manager/Marissa Mayer critic Eric Jackson on Starboard's call for an AOL (AOL +3.7%) merger: "I don't think it will happen but I do think Yahoo is now in play. It puts more pressure on Mayer ... Between now and four months from now someone will want to submit a short board slate and they will have a strong case."
- Re/code has previously reported Mayer is uninterested in an AOL deal, believing it's "small, unexciting, uninspiring and backward-looking."
- Meanwhile, Yahoo has announced it's shutting down 3 more products: Yahoo Education (connects education providers with content), the Yahoo Directory service, and video-creation app Qwiki. Qwiki was acquired in 2013.
- Earlier: Starboard discloses Yahoo stake, calls for AOL merger
Fri, Sep. 26, 12:21 PM
- In an open letter, activist investor Starboard Value says it's "a significant shareholder" in Yahoo (YHOO +3.9%), and calls for the company to "explore a strategic combination with AOL (AOL +6.1%)."
- Starboard also wants Yahoo to "[unlock] the substantial value" in its Alibaba and Yahoo Japan stakes in a tax-efficient manner (could be easier said than done), cut losses in its display ad/content ops by $250M-$500M through cost cuts, and put an end to its "aggressive" M&A strategy.
- The firm estimates a $17.67/share "value gap" exists between Yahoo's trading price and its sum-of-the-parts valuation, something it attributes to tax worries and concerns about how Yahoo will spend any Alibaba/Yahoo Japan proceeds (previous).
- It thinks an AOL deal "could offer synergies of up to $1 billion by significantly reducing the cost overlaps in [Yahoo and AOL's] Display advertising businesses as well as synergies in corporate overhead." Starboard also believes an AOL merger could lower Yahoo's Alibaba/Yahoo Japan tax bill.
- Josh Brown argued last week Yahoo is now a prime target for activists. Starboard once waged a failed proxy battle against AOL.
- Yahoo and AOL have both spiked in response to Starboard's letter.
Thu, Sep. 25, 9:22 AM
- Like Bernstein and BofA/Merrill earlier this week, RBC's Mark Mahaney thinks the Alibaba IPO does away with Yahoo's (NASDAQ:YHOO) main catalyst. He's downgrading shares to Sector Perform, albeit while keeping a $44 target (originally set last December).
- Mahaney is downbeat about Yahoo's core business, and thinks Alibaba's offering became priced in during the weeks leading up to the IPO.
Mon, Sep. 22, 5:34 PM
- Yahoo's (YHOO -5.6%) remaining 384M-share Alibaba stake is worth $34 pre-tax, but perhaps only $21/share post-tax, estimates Bernstein's Carlos Kirjner, who downgraded shares earlier today. "This makes it clear why the tax treatment of the Alibaba stake is such an important swing factor for the value of the stock."
- Kirjner thinks Yahoo could be worth $44/share on a sum-of-the-parts basis. He suspects Yahoo's discount to this valuation stems from " the risk perceived by the market that Yahoo!’s management will invest some of the cash it currently has .. in ways that could destroy value."
- He also points out Yahoo's bottom line is about to be hurt by the ending of Alibaba royalty payments (~$120M over the last 12 months). FBR's William Bird does the same, and also observes a 1-year lockup agreement exists for Yahoo's remaining Alibaba stake.
- "It’s going to be a very interesting fall ... And it could go either way," Kara Swisher reports hearing a Yahoo exec tell her. By "either way," the exec meant Yahoo could either make a big acquisition, or become an M&A target itself (previous).
- Swisher notes many rumors claim Yahoo has been looking for a major ad tech purchase, and that the company is also likely to eye content companies. However, she once more throws cold water on rumors Yahoo is looking to buy AOL. "In all my checking of numerous sources, this is not in process and such a deal seems just a fervent hope of [AOL] CEO Tim Armstrong."
Mon, Sep. 22, 7:32 AM
- The Alibaba catalyst in the rearview mirror, Bank of America and Bernstein both pull Buy ratings on Yahoo (NASDAQ:YHOO).
- Softbank (OTCPK:SFTBF) tumbled 6.1% in Tokyo action overnight. "Part of the market used Softbank as an investment vehicle for Alibaba," says Jefferies' Atul Goyal. "And now that segment of the market doesn’t need to invest in it." Softbank owns 34% of Alibaba and its CEO said last week it has no intention of being a seller. Goyal reminds those selling Softbank today that Alibaba is just one of its investments, and Masayoshi Son has a number of other potential gems in the portfolio.
- Yahoo -2% premarket
Fri, Sep. 19, 6:15 PM
- With a market cap of $233.9B as of today's close, Alibaba (NYSE:BABA) is the 4th-most valuable tech company on the planet, behind only Apple, Google, and Microsoft. Nonetheless, many on the Street have argued shares are fairly valued or undervalued.
- Cantor, which started coverage with a Buy and $90 target earlier this week: "We believe that a differentiated pricing model, strong brand, and unmatched scale give Alibaba an unfair competitive advantage relative to peers ... While the stock's not cheap, we believe the company's outsized growth and margin profiles, if sustained, should support higher valuation over time."
- Wedbush, whose $80 target has already been surpassed, thinks "Chinese e-commerce appears to have room to grow at 30%+ for several years." CRT Capital's $95 target implies a multiple of 26x 2016E EPS, something it considers justified given a 35%+ revenue CAGR is forecast for 2014-2017.
- On SA, Triton Research observes Alibaba's 2013 marketplace revenue as a % of GMV (3.1%) was a tiny fraction of eBay's (19.3%), leaving plenty of room for growth even if eBay-like monetization isn't feasible in China.
- Value Record is more cautious, viewing Alibaba's VIE legal structure as a risk and questioning how successful its international expansion plans will be - Baidu and many other Chinese Web names have had a rough time trying to replicate their domestic success.
- Yahoo (YHOO -2.7%) closed lower, albeit off the day's lows. With shorts having trouble borrowing Alibaba shares, some may have settled for shorting Yahoo instead.
- Josh Brown thinks Yahoo's pending IPO windfall and large remaining Alibaba stake once more make it a prime target for an activist. "There is absolutely no way, in my opinion, they're going to allow this management team, this board of directors to take $6 billion, do a buyback and then have another free $6 billion in cash to experiment."
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