Yahoo! Earnings Preview: No Growth, So What's Next?
Yahoo! (NASDAQ: YHOO), which announced that its most popular sites were promptly updated after the 'Heartbleed' bug was revealed last week, is scheduled to share its first-quarter 2014 results Tuesday, April 15, after the closing bell.
Investors and analysts will still be looking for updates on the Alibaba initial public offering. Yahoo! owns a 24 percent stake in the China-based e-commerce company. Also in focus: Yahoo!'s television programming efforts. Investors also will have an eye on such metrics as display revenue, ads sold, paid clicks and price-per click.
Analysts on average predict that Yahoo! will say its revenue for the quarter totaled $1.08 billion, which would be about the same as in the year-ago period. Earnings of $0.37 per share are also in the consensus forecast. That would be down year-over-year from to a reported profit of $0.38 per share.
While individual earnings per share (EPS) estimates range from $0.25 to $0.48, the consensus expectations have not changed in the past 60 days. But note that analysts underestimated earnings in the past four quarters, by eight cents per share, or 21 percent, in the fourth quarter.
Yahoo! said in the fourth-quarter report that the number of ads sold increased but the price ad decreased, and that the paid clicks increased while the price per click declined. The share price dropped more than eight percent following the fourth-quarter report.
Looking ahead to the current quarter, the forecast currently calls for the top and bottom lines to be flat sequentially, as well as marginally higher than in the same period of last year. That consensus EPS estimate also is unchanged in the past 60 days.
Yahoo! is a search and Internet portal company that offers such features as Yahoo! Mail, Yahoo! Answers, Yahoo! Messenger, Flickr and Tumblr. It also has digital magazines, Web and mobile apps and advertising platforms. The company claims to have approximately 800 million monthly users.
This S&P 500 component was founded in 1994 and its headquarters are in Sunnyvale, California. It now has a market capitalization of more than $33 billion. Marissa Mayer has been president and chief executive officer of the company since July of 2013.
Competitors include AOL, which is expected to show solid growth on the top and bottom lines in the first quarter, and Google, which will have strong EPS and revenue growth in the most recent quarter, if analysts are correct. Google also is scheduled to share its first-quarter results this week.
During the three months that ended in March, Yahoo! announced the retirement of a board member, formed a partnership with Carnegie Mellon University, broke ground on a new facility in Illinois, and unveiled new products and media sites for mobile at the Consumer Electronics Show.
Yahoo! has a long-term earnings per share growth forecast of more than seven percent, and the forward earnings multiple is less than the trailing price-to-earnings (P/E) ratio. Its return on equity is more than 10 percent, and the operating margin of 12.3 percent is less than that of Google.
The number of Yahoo! shares sold short, as of the most recent settlement date, represents more than two percent of the total float, but that was the lowest level of short interest since last October. It would take about a day to close out all of the short positions.
The consensus recommendation of the analysts surveyed by Thomson/First Call who follow the stock is to hold Yahoo! shares, though it has no Underperform or Sell ratings. The analysts' mean price target, or where they expect the stock to go, is more than 19 percent higher than the current share price.
Shares have retreated almost 18 percent in the past three months and are recently slipped below the 200-day moving average for the first time in more than a year. Over the past six months, Yahoo! has not only underperformed AOL and Google, but the Nasdaq and the S&P 500 as well.
At the time of this writing, the author had no position in the mentioned equities.
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