BMO Capital’s Daniel Salmon mentioned that Yahoo! Inc. YHOO reported its 2Q16 ex-TAC revenue ahead of the estimate and in line with the consensus, although the non-GAAP EPS came in below expectations.
Salmon maintained a Buy rating on the company, while raising the price target from $38 to $39.
2Q Results
Search paid clicks declined 24 percent in Q2, while search PPC grew 8 percent, display ads sold rose 9 percent and display price per ad declined 15 percent.
“Guidance for 3Q16 was in line with consensus: revenue ex-TAC is expected to be $840-880mm, while adjusted EBITDA is seen in the range of $190-220mm,” the analyst stated.
The company also took an impairment charge of $484 million related to Tumblr, and completed the transition of Microsoft Corporation MSFT search sales, which Salmon explained meant that revenue would now be recognized on a gross basis.
No News On Core Sale
However, Salmon also pointed out that “the most important element of today’s report was the lack of news on the core business sale process; all news reports point to completion in the near term.”
CEO Marissa Mayer stated that Yahoo was “deep into the process of evaluating proposals,” and the analyst continues to believe the most “sensible” buyer for the core would be Verizon Communications Inc. VZ
“In light of continued challenging fundamentals, we believe expectations for proceeds from a core business sale should remain conservative,” Salmon added.
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