Goldman Sees Yahoo's Performance Having Little Effect On Valuation
Yahoo! Inc. (NASDAQ: YHOO) reported in-line 2Q results, while keeping its guidance unchanged. Goldman Sachs’ Heath P. Terry maintained a Neutral rating on the company, while raising the price target from $38 to $39.
Yahoo reported its 2Q revenue ex-TAC at $841mn, representing a 19 percent y/y decline, versus an 18 percent decline in 1Q. The revenue figure marginally missed the Goldman estimate of $843mn. Adj. EBITDA came in at $172mn, higher than the estimate of $150mn. Yahoo guided to 3Q16 revenue ex-TAC of $840-$880mn, compared to the estimate of $865mn.
Although management continues to pursue strategic alternatives, no details were provided, analyst Heath Terry noted.
Search revenue ex-TAC declined 24 percent y/y to $319mn. The amended agreement with Microsoft Corporation (NASDAQ: MSFT) contributed $252mn to GAAP search revenue and search TAC. Yahoo indicated that it expects a similar impact in future quarters.
Display revenue ex-TAC declined 3 percent to $396mn. Mavens revenue was down 4 percent y/y. “Video advertising drove the decline due to pricing pressure, increased supply, and potential impact to demand from Yahoo’s strategic review,” Terry mentioned.
What Has Changed?
The analyst wrote, “We see little impact to valuation in the near- to mid-term from fundamental performance, as balance sheet assets continue to make up the majority of the company’s market cap.” The EPS estimates for 2016, 2017 and 2018 have been reduced from $0.02 to $(0.37), from $0.20 to $0.18 and from $0.22 to $0.20, respectively.
The upward revision in the price target reflects “changes in the value of the underlying assets in our SOTP,” Terry added.
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|Oct 2016||MKM Partners||Maintains||Buy|
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