Some Analyst Comments on Yahoo’s Q4

Couple of analyst comments on Yahoo’s Q4 from my flooded inbox:

RBC Capital Markets (Jordan Rohan)
RBC Capital Markets analyst Jordan Rohan increased price target to $31 from $30 and maintained his Outperform rating on Yahoo! Inc. (NASDAQ: YHOO) this morning.  According to Rohan, 4Q06 results were at the high end of the guided range, driven by display advertising. Midpoint of FY07 guidance fell shy of consensus, but the company pointed to strength in pacings thus far in 2007. Assuming a contribution from Panama in the second half of 2007, upside to estimates is possible in the back half of the year. YHOO shares are likely to rally near term in anticipation of better search monetization.  Looking out 12 months, Rohan believes shares of YHOO will trade modestly higher than they do today.

Citigroup Investment Research (Mark Mahaney)
- YHOO reported a Beat & Lower Q — $1.23B in rev/$0.16 EPS vs. our/Street ests of $1.20B/$1.22B & $0.13. YHOO’s first EPS Beat in over a year! Display & Search exhibited less growth deceleration than expected. ’07 outlook was conservatively placed below Street — midpoint rev/EBITDA of $5.2B/$2.1B vs. $5.5B/$2.2B Street. KEY positive was the 02/05 Panama launch date!
- Fundamentals were mixed. Organic Y/Y growth decelerated to 14% from 22% Y/Y in Sep, but EBITDA margin rose to a record high 44%.
- Shading down estimates — ’07 EBITDA goes from $2.2B to $2.1B; EPS from $0.55 to $0.52. PT remains $35 — 15X ’08E EBITDA.
- Stock should continue to work because 1) the bar has been reasonably lowered; 2) full Panama catalyst is imminent (Q2:07 should begin search reacceleration); 3) display ad growth remains robust; 4) Risk-reward appears good with 14% dside to 10X trough EV/EBITDA valuation ($23) and 30% upside to PT.

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Comments

  1. blofeld says:

    I love “guidance fell shy of consensus”. It missed by a mile. What is he talking about ‘fell shy’?
    Let’s see. Panama is coming out early yet guidance shows slowing revenue growth and decreasing EBITDA margins. The year is back end loaded. Why is everyone so jazzed about this stock?
    I’ve said it before and I’ll say it again. Panama ranking won’t do *anything* for their business and their guidance proves my point.

  2. John K says:

    Blofeld, I don’t believe Panama “is coming out early” – despite what Paul K. said yesterday on CNBC and is implying in some of his posts.
    Last July, Yahoo announced the current schedule. They seem to be meeting that schedule at best.
    Here’s what CNN reported after 2nd quarter 2006 results came out:
    “The company was expected to unveil its new search technology, codenamed Panama, by the end of the summer, but Semel said during the call that the rollout would not take place until the fourth quarter. Analysts should not factor in any improved results from the new search tools into their financial models until the first quarter of 2007, Semel said.”
    http://money.cnn.com/2006/07/18/technology/yahoo_analysis/index.htm?cnn=yes
    Now, we find out that Q1 has no improvement planned from Panama. So how is this an “early roll out”??
    Beyond that, Panama had already slipped for over a year.

  3. John — No argument from me that Panama’s late. And no argument from me either than Panama’s no panacea, nor even that it will bring Yahoo’s traffic monetization levels anywhere near Google’s.
    But that’s not the point. We’re not dealing in absolutes here, we’re dealing in relative differences. My point has been that, risk-adjusted, Yahoo is a better stock pick (consult a broker, your mileage may vary, etc.) than others in the search class. Not because it’s a better company, but because it has more monetization, acquisition, and personnel upside than do, say, Microsoft or Google.
    But is Panama going to save Yahoo, or turn it into Google 2.0? Fat chance.

  4. John K says:

    Yes, agreed. I happen to own both stocks.
    I’m a bit less sanguine than you about Yahoo’s ability to beat Google, even starting from a lower base. But I think probability is on your side.
    I just wondered where the meme that “Panama is releasing early” came from.
    If anything it shows that the blogosphere and blog pundits like yourself can impact the market more than people would think – because the information about Panama’s schedule is not new, but the interpretation / perception of it certainly is.

  5. toptop says: