YHOO

Google’s First-Quarter Performance: Business as Usual

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On Wednesday, Google (GOOG) reported decent first-quarter results. The search giant’s revenue increased across-the-board on a year-over-year basis: Google properties revenue advanced 21%, network revenues increased 4%, while other revenues jumped nearly 50%. This is impressive year-over-year performance for any firm regardless of its size, but the market had expected even more from the Internet behemoth. What spooked investors a bit was that Google’s revenue declined across-the-board on a sequential basis (from the December quarter to the March quarter), representing somewhat of a divergence from recent historical patterns. Nonetheless, we put greater weight on the year-over-year numbers because they correct for seasonality. While we liked what we saw in the first quarter, the market is not necessarily incorrect in its … Read more

eBay’s Same-Store Sales Are Accelerating

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No longer is eBay (EBAY) a simple auction website. With PayPal, eBay has become an Internet commerce powerhouse and an impressive, hard-to-duplicate payment platform. If this weren’t enough to get investors excited about the company’s stranglehold on the Internet, Carl Icahn is taking some major steps to coerce the market to recognize eBay’s true intrinsic value. The activist guru is encouraging management to conduct an initial public offering (IPO) of PayPal, a move that we think will unlock shareholder value. We’ve seen companies spin off subsidiaries many a time before, the most recent planned offering is Yahoo (YHOO) and Alibaba, for example. Yahoo has performed wonderfully in light of the monetization and increased liquidity of its investment in Alibaba, and … Read more

Baidu Dollars Likely Shifting to Alibaba Near Term; Raising Our Fair Value of Yahoo

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Valuentum previewed the valuation of Chinese e-commerce giant Alibaba in October 2013. Today, we’ve updated our analysis of the company in the table below and have raised our intrinsic value estimate to approximately $100 billion from $75 billion previously. This revision has had a relatively large per-share upward re-valuation of the shares of 24%-owner Yahoo (YHOO) in its 16-page report. Softbank, which owns more than 35% of Alibaba, will also see a more optimistic slant towards its own valuation in coming periods. Our updated valuation details of Alibaba are shown below. The previous table had a typo regarding the long-term growth rate of the perpetuity calculation, which has been corrected in the table above. Though we think our forecasts are … Read more

The Valuentum Buying Index Doesn’t Disappoint: Highest-Rated Baidu Reports

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Article updated to reflect pricing open. We’re still navigating through a rough patch in growing the outperformance of the Best Ideas portfolio, but we were very pleased to see continued validation of the efficacy of the Valuentum Buying Index, our stock-selection methodology, with Best Ideas portfolio holding Baidu (BIDU) reporting excellent fourth-quarter results after the market close Wednesday. Chinese Internet search giant Baidu is one of the top-rated firms registering a pristine 10 on the Valuentum Buying Index and one of the latest inclusions to the Best Ideas portfolio, added August 1, 2013 (view email transaction alert archive here). Shares were trading at $133.60 at the time of the alert, representing more than a 30% move in just the past … Read more

Sign of the Times: Facebook Soars, Yahoo Sours

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On January 29, Facebook (FB) kept the fundamental momentum going in its operations. The social media giant announced impressive fourth-quarter results, revealing that revenue jumped 63% (see image below) thanks to a 76% increase in revenue from advertising. Facebook indicated that mobile advertising revenue now represents more than half of advertising revenue compared to less than 25% in the same period a year ago. Income from operations nearly doubled in the period, to $1.13 billion, as the firm’s GAAP operating margin leapt 11 percentage points, to 44%. GAAP net income advanced to $523 million, compared to $64 million in the fourth quarter of 2012. Diluted earnings per share came in at $0.20 per share in the quarter, up from $0.03 … Read more

Get To Know Yahoo!’s Management; We Value Alibaba at $75 Billion

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The only question that comes to mind after looking at the below slide is: What turnaround? Image Source: Yahoo GAAP revenue down 5%. Revenue ex-TAC down 1%. Adjusted EBITDA down 19%. Income from operations down 39%. Non-GAAP operating income down 27%. Net earnings down 91%. EPS attributable to Yahoo down 89%. Non-GAAP EPS down 13%. Free cash flow down 73%. Cash and marketable securities down 66%. It’s flat-out puzzling that CEO Marissa Mayer included the following statement in the third-quarter press release: “I’m very pleased with our execution, especially as we’ve continued to invest in and strengthen our core business.” We understand the importance of staying positive, but her statement is quite a stretch considering actual financial performance at the core Yahoo business.  The only line item in … Read more

Yahoo’s Turnaround Not Progressing As Planned

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On Tuesday, Yahoo (click ticker for report: ) reported lackluster second-quarter results that showed its turnaround is not progressing as planned. The firm’s revenue (excluding traffic acquisition costs—TAC) dropped modestly from the same period a year ago, while non-GAAP income from operations fell 13% (adjusted EBITDA decreased 7%). Earnings in equity interests, which include its 24% stake in China-based Alibaba Group and 35% ownership in Yahoo Japan, advanced nearly 25% (representing one of the few bright spots in the quarter). Non-GAAP net earnings per share jumped 19%, to $0.35, better than the consensus estimate, but the performance was bolstered primarily by a reduced share count. The quarter was a low-quality beat, in our view, and we’re particularly discouraged by Yahoo’s core … Read more

Yahoo! Buys Tumblr: Instagram or Flickr?

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Former web titan Yahoo! (click ticker for report: ) made headlines this morning after announcing it acquired social media/blog site Tumblr for $1.1 billion, mostly in cash. Even though Tumblr generates little revenue, Facebook (click ticker for report: ) did acquire Instagram for $1 billion (in cash/stock at the time) when the company didn’t post any revenue. Given the amount of venture capital readily flowing into Internet media companies, a valuation that seems ridiculous in any other industry has simply become the going rate in tech (right or wrong). Ultimately, if the present value of the future free cash flows generated by the acquired asset is greater than the price paid for the asset, we’d view an acquisition as value-creative. … Read more

Yahoo: The Turnaround

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Internet search and content provider Yahoo (click ticker for report: ) reported first-quarter results that were mediocre. Revenue ex-TAC (excluding traffic acquisition costs) was flat year-over-year, falling short of consensus estimates. Earnings per share easily exceeded consensus expectations, rising 52% year-over-year to $0.35. Yahoo provided non-GAAP earnings per share of $0.38 that excluded stock-based compensation expense. Unfortunately for shareholders, the EPS increase was mostly the result of a 10% reduction in share count, a reversal of one-time charges, and a significantly lower tax rate. Non-GAAP operating income fell $7 million year-over-year to $224 million. Operating cash flow also declined to the magnitude of 26%, while free cash flow also declined 20%. In our view, the quarter was not nearly as strong … Read more

Shares of Baidu Are Just Too Cheap

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Valuations for internet technology companies are literally all over the place. On one end of the spectrum sits LinkedIn (click ticker for report: ) and Amazon (click ticker for report: )—fast growing firms with sky-high PE multiples and tremendous credit given to the long-run. On the other end, we have Apple (click ticker for report: ) generating fantastic amounts of free cash flow, and trading with a single-digits forward PE. Chinese search giant Baidu (click ticker for report: ) falls closer to Apple, and we think shares look incredibly cheap at current levels. Let’s take a closer look at the search giant. Valuation Baidu’s valuation on a discounted cash flow basis looks extremely reasonable. We estimate shares to be worth … Read more