In the past week, hundreds of Trefis members have created forecasts for two key drivers of Yahoo’s (YHOO) stock value: (1) Search Market Share and (2) Revenue per Search (RPS).
Their forecasts suggest that Yahoo’s search market share will trend slightly higher than the Trefis forecast, and that Yahoo will gain share from Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) Bing, AOL (NYSE:AOL), and Ask.com.
Search advertising is Yahoo’s most important division, constituting 25% of the $21 Trefis price estimate for Yahoo’s stock. Given the importance of the search advertising business, Yahoo’s stock is quite sensitive to (1) Search Market Share and (2) Revenue per Search. Below are charts showing recent estimates created by Trefis members for the two drivers.
1. Yahoo’s Search Market Share
On average, Trefis members forecast that Yahoo’s search market share will decrease from 11% in 2010 to 10.4% by the end of the Trefis forecast period. By contrast, Trefis analysis predicts that Yahoo’s search share will decline from 9.8% in 2010 to 9.1% by the end of the Trefis forecast period.
The member estimates imply an upside of 4% to the Trefis price estimate for Yahoo’s stock. In the past, Yahoo’s Search Market Share has decreased from 22.8% in 2003 to 10.4% in 2009.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of Yahoo’s stock to Yahoo’s Search Market Share.
2. Revenue Per Search
The revenue that Yahoo generates from every 1000 searches on its website increased from around $23 in 2005 to $25 in 2008, and then declined to $21 in 2009 owing to the weak macro-economic environment. However, we expect Yahoo’s revenue per search to trend upward and reach $25 by the end of the Trefis forecast period. We expect this growth to come from improvements in Yahoo’s ad ranking algorithm that Yahoo is working towards, as well as rising search volumes on mobile devices.
You can drag the forecast trend line above to express your own view, and see how changes in revenue per search impact Yahoo’s stock.
Disclosure: No positions