Why Yahoo! Needs To Fix Advertising Pricing, Right Now

Yahoo! Inc. YHOO reported disappointing first-quarter results on Tuesday. EPS of the company came at $0.15 on revenues of $1.043 billion versus analysts’ estimates of $1.08 and $1.054 billion, respectively.

Scott Kessler from S&P Capital IQ, which has a Hold rating on the stock, was on CNBC Wednesday to discuss Yahoo’s results.

Not Really Sure

“When the company reported results, the stock traded lower and then once they started to talk about Yahoo! Japan and strategic alternatives then the stock seem to gain some [lift],” Kessler said. “Right now, I think, people aren’t really sure where Yahoo! is going.”

He continued, “That’s frankly been a theme for the last couple of years that’s just at back a couple of years ago, up until say last year it really was about Alibaba. Now people aren’t really sure what the emphasis should be on.”

Advertising Pricing Needs To Be Fixed

Kessler was asked if Yahoo’s CEO, Marissa Mayer, make the company win in the internet search space ultimately. He replied, “We have a Hold opinion on the stock, we actually took down our 12-month target price to $52 from $57. Really the thinking is that the operations are still a big question mark and yes search was better because of an alliance with Mozilla, which owns Firefox.”

“But look at display advertising pricing down double digits for four straight quarters. Yahoo needs to fix that we think for significant appreciation in the stock at this point,” Kessler concluded.