Yahoo!: Color on the Qtr; Alibaba Commentary & Valuations
--> YHOO rallied to $37.40 following the report but has slipped back to $36.69 in pre-market.
- Pacific Crest notes YHOO outpaced expectations. EPS upside came from equity interest (Alibaba- Ticker: ALBCF.PK) and a lower than- expected non-GAAP tax rate. After missing expectations in Q2 and Q3, Alibaba Q4 revenue of $3.06 billion was better than estimates of $2.76 billion. It is a great result for Alibaba due to its public offering, although those two things may be related. Operating income was relatively in-line. Alibaba's growth accelerated, which sets YHOO up for more near-term optimism. Pac is still not seeing a turn in core EBITDA, which would indicated a turnaround in the core.
- RBC Capital couches the YHOO results as 'generally in-lineish'. Positives: 1) Stabilizing Display Trends; 2) Share Repo's; 3) Leaning Positive User Metrics; & 4) $301MM Earnings In Equity Interests highlights value. Negatives: 1) Search Results A Bit Tentative; 2) Back-End Loaded '14 Profitability; & 3) Mobile, Social, and Video are still not material for YHOO. Maintains $44 tgt.
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Stifel notes the salient point of Yahoo's 1Q14 results was the very strong December quarter results from Alibaba. Revenue growth at Alibaba reaccelerated to 66% growth ($3.1bn), well above the 51% growth in the previous quarter. Investors had been concerned over continued revenue deceleration. The 66% growth was well ahead of any estimates and 54% operating margins were the highest reported margins to date. RBC maintained valuation assumptions for Yahoo's stake at $120bn at IPO and $200bn post IPO, this quarter gives firm decent conviction that the valuation will ultimately be higher than $200bn. On the operational side, Yahoo's results/guide are showing modest improvements. Firm reiterates Buy rating and $49 target.
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