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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.
- 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.
Wed, May. 14, 7:23 AM
- The deal for undisclosed terms comes days after Snapchat settled FTC charges accusing it of deceiving customers by promising photos sent on its service disappeared forever after a certain amount of time.
- Yahoo (YHOO) has yet to comment on the purchase, which was announced on the Blink website, but the deal is the latest in a number of small, mobile start-ups acquired since Marissa Mayer took the helm.
- Snapchat, of course, famously rejected a $3B purchase offer from Facebook late last year.
Tue, May. 13, 4:52 AM
- The European Union Court of Justice (ECJ) has ruled that Google (GOOG) can be ordered to delete sensitive information, under certain conditions, from its Internet search results if it is requested to do so.
- Google had argued that forcing it to remove data amounted to censorship, although privacy advocates believe that people should be able to delete their digital traces.
- The issue arose after a Spanish man complained that his privacy was infringed when an auction notice of his repossessed home appeared on search results.
- Other relevant tickers: YHOO, MSFT, YNDX, BIDU
Wed, May. 7, 10:50 AM
- Has irrational exuberance given way to panic selling? Internet stocks are off again today, as the Street registers disappointment with earnings reports from AOL, Groupon, Zulily, SouFun, 500.com, and King.
- Yahoo (YHOO -6.2%) has fallen below $35 as the Street digests Alibaba's IPO filing. Twitter (TWTR -4.4%), crushed yesterday following its lockup expiration, briefly cracked $30 before rebounding a bit.
- Other decliners: QIHU -8.9%. BITA -7.2%. GOMO -7%. TRLA -5.2%. MELI -4.7%. ANGI -4.6%. Z -4%. YOKU -5.5%. CTRP -5.3%. WUBA -5.3%. JOBS -5.1%. GRUB -4%.
- Internet/social media ETFs: PNQI, SOCL, FDN
Wed, May. 7, 8:04 AM
- Bloomberg reports Alibaba (ABABA) is looking to sell a 12% stake through its IPO. At a $150B valuation, that would imply raising $18B; at a $200B valuation, $24B.
- A big selloff in momentum stocks (inc. Chinese Internet companies) might lead to some downward pressure on Alibaba's multiples. At $200B, the company would be worth 92x 2013 adjusted net income of $2.16B - forward multiples might be considerably lower.
- Meanwhile, though Yahoo (YHOO) is required to sell a chunk of its 22.6% stake at IPO time, SoftBank (SFTBF) says it won't sell any part of its 34.4% stake, in spite of its big investments in Sprint and $3.2B deal to buy Japanese broadband provider eAccess. Shares fell 5.1% overnight in Tokyo.
- There's some disappointment over the fact Alibaba didn't break out details for its Taobao and Tmall sites. Would-be investors are also keen to learn more about how Alibaba plans to grow its international sales (8.8% of 2013 revenue), an effort bound to put the company on a collision course with Amazon and eBay.
- Yesterday: Alibaba files for IPO, shows off big numbers
- Alibaba's prospectus
Tue, May. 6, 5:00 PM
- Alibaba (ABABA) has released its long-anticipated F-1. No trading symbol has been proposed yet, and the company nominally says it's looking to raise up to $1B (it'll almost certainly raise more). The IPO underwriters: Credit Suisse, Deutsche, Goldman, JPMorgan, Morgan Stanley, and Citi.
- Alibaba had 2013 revenue of $5.55B (+73% Y/Y), net income of $1.35B, and adjusted net income of $2.16B. Gross margin was 71.9%. R&D spend totaled $604M, sales/marketing spend $581M, and G&A spend $465M.
- The company claims an annual gross merchandise volume (GMV) of $248B on the back of 11.3B orders, 231M active buyers, and 8M active sellers.Q4 GMV rose 53% Y/Y to RMB529B, with mobile accounting for 19.7% of the total. Mobile MAUs amount to 136M.
- Chinese commerce accounted for $4.69B of the company's 2013 revenue. International commerce accounted for $669M, cloud services $105M, and everything else $87M.
- Founder Jack Ma owns 8.9% of shares going into the IPO. SoftBank (SFTBF) owns 34.4%, and Yahoo (YHOO) 22.6%.
- Yahoo investors are taking the F-1 release in stride. Shares -0.3% AH.
Fri, May. 2, 11:12 AM
- Re/code reports Alibaba's (ABABA) anticipated IPO filing is expected to arrive early next week.
- Yahoo (YHOO +0.7%) has caught a slight bid on the report. Shares jumped two weeks ago after the company announced Alibaba's Y/Y revenue growth accelerated to 66% in Q4 from 51% in Q3, and that its net income grew 110%.
Fri, Apr. 25, 3:35 AM
- Alibaba (ABABA) is considering expanding its IPO to over $20B, which would make it the largest listing in U.S. history, the WSJ reports.
- The offering would be above the $19.7B that Visa raised in 2010 and could even top the world record $22.1B that Agricultural Bank of China attracted in Shanghai and Hong Kong in 2010. Until now, figures of $15-16B have been bandied about for Alibaba's IPO.
- Under the plan being discussed, Alibaba would sell shares in addition to its investors, which include Yahoo (YHOO). Another major shareholder, Softbank (SFTBF), is not planning to sell shares in the deal.
- "Alibaba is at the point where, after the extreme growth they've had, they're going to need capital to make another huge push forward," says investment adviser Paul Boyd.
Mon, Apr. 21, 12:43 PM
- BrightWire reports Alibaba's (ABABA) is still working on its anticipated F-1, and won't file the document this week. Reuters previously reported a filing could happen by today.
- Separately, Alibaba has said it plans a major revamp of its massive Taobao marketplace (focused on consumer sales), whose UI has occasionally been criticized. Alibaba promises to improve Taobao's navigation (making it less dependent on search activity), as well as to add interactive features for its mobile apps.
- The Street's expectations for Alibaba's IPO were ratcheted higher last week after Yahoo (YHOO -0.1%) reported the company's sales rose 66% Y/Y in Q4 to $3.06B, and its net income 110% to $1.35B. Many think a $200B+ valuation is in the cards.
Thu, Apr. 17, 10:52 AM
- Yahoo (YHOO -1.1%) co-founder David Filo, absent from the company's board for 18 years, will stand for election at Yahoo's 2014 annual meeting.
- Filo began taking a more active role at Yahoo in 2012, following Marissa Mayer's hiring, and remains a major shareholder.
- Yahoo has also nominated Charles Schwab, founder of the brokerage that bears his name, and former Wal-Mart CEO H. Lee Scott Jr. to its board.
- Following recent defections, Yahoo's board only has five members. Schwab and Scott mesh with the company's reported interest in adding directors with experience running a major company.
- Yesterday: Yahoo lands upgrades following Q1 report, Alibaba numbers
Wed, Apr. 16, 6:21 PM
- Going forward, Google (GOOG) will break out its paid click and cost per click data in more detail, CFO Patrick Pichette states on the CC. Numbers for Google's reporting segments (sites, ad network, etc.) will be given in addition to a company-wide figure. (CC live blog)
- The remarks come after Google reported disappointing Q1 paid click growth (-1% Q/Q and +26% Y/Y). The numbers might fuel questions about the impact mobile apps (they account for 86% of U.S. smartphone activity, per Flurry) are having on search activity. When indirectly asked about the issue, sales chief Nikesh Arora only said Google is trying to succeed in both realms.
- Pichette states EPS was hurt by one-time legal and M&A expenses, and that Google's expenses would've been in-line with its targets otherwise.
- Separately, re/code reports Marissa Mayer is intent on convincing Apple to abandon Google as its default iOS search provider in favor of Yahoo (YHOO). Google's dominant mindshare, together with Apple's Maps experience, might make Cupertino think twice.
- GOOG now -2.8% AH. Q1 results, details.
Wed, Apr. 16, 2:22 PM
- "Holy Alibaba!" exclaims Bernstein's Carlos Kirjner after looking at the Q4 numbers disclosed by Yahoo (YHOO +5.7%) yesterday. He now values the Chinese e-commerce giant at $245B - 25x estimated 2016 earnings of $9.5B for its core Taobao and Tmall sites + a $7.5B valuation for Alibaba.com and Alipay. Taobao/Tmall profits are now expected to grow 41% in 2015, and 28% in 2016.
- Wells Fargo and Gabelli have upgraded Yahoo: The latter calls shares "ready for takeoff" as hype surrounding Alibaba's (ABABA) IPO - an F-1 reportedly could arrive by Monday - continues growing.
- Looking at Yahoo itself, UBS (Buy) is pleased with the top-line impact of the company's in-stream ads (now 20% of display ad volume). It's less happy with Yahoo's vague CC remarks (transcript) about the tax impact of Alibaba share sales and future cash returns, EBITDA weakness (due to growth investments), and high headcount.
- SunTrust (Buy) observes rising mobile ad sales (along with in-stream and premium ads) helped display impressions rise 7%, and that the Americas (where new ad products have been launched first) is outperforming.
- Marissa Mayer mentioned on the CC Yahoo's news app is respectively ranked #1 and #2 in the news app category on the App Store and Google Play, that most mobile search metrics rose nearly 100% Y/Y, and that video streams (boosted by the Olympics and recent content deals) rose 30% Q/Q.
Wed, Apr. 16, 9:09 AM
Wed, Apr. 16, 4:08 AM
- Alibaba Group (ABABA) could file the prospectus for its U.S. IPO on Monday, Reuters reports, adding that the listing could be worth over $16B.
- The report comes after major shareholder Yahoo (YHOO) disclosed that Alibaba's Q4 net income surged 110% to $1.35B as revenue jumped 66% to $3.06B.
- Alibaba's results helped Yahoo's shares climb 6.8% in AH trading. In Tokyo, shares in SoftBank (SFTBF), which owns 37% in Alibaba, jumped 8.5%.
Tue, Apr. 15, 5:42 PM
Tue, Apr. 15, 4:34 PM
- 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
Tue, Apr. 15, 4:06 PM
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