Yahoo Earnings Preview: What YHOO Stock Owners Need to Know

by James Brumley | April 15, 2014 8:23 am

Yahoo Earnings Preview: What YHOO Stock Owners Need to Know

Yahoo (YHOO[1]) faces a big, big question: Will today’s Yahoo earnings report finally be the one that vindicates Marissa Mayer taking the helm of the search portal back in June of 2012?

yahoo logo Yahoo Earnings Preview: What YHOO Stock Owners Need to KnowWhile it would be inaccurate to say that Yahoo and YHOO stock have been poor performers under her tutelage, most investors were tacitly expecting to see even more signs of organic strength from the recent Yahoo earnings releases.

Yahoo earnings for Q1 could be a make-or-break report

Hot Topics for Q1′s Yahoo Earnings Call

In Mayer’s defense, Yahoo! was already falling behind in a key arena when Mayer took over as CEO. That battleground was — and still is — mobile, and it’s becoming increasingly important as users migrate away from desktops and toward mobile connections and tools.

Some staggering numbers put things in perspective too, like the fact that 56% of the world’s populace now owns a smartphone[2], and half of those smartphone owners use their mobile device as their primary (if not sole) way to access the web.

That matters because although YHOO offers mobile apps and options, none of them are seen as must-haves (perhaps until now). That also matters because Yahoo’s market share of the display ad market on desktops and laptops fell again last year, from 6.8% to 5.8%[3].

YHOO needed to, and started to, get serious about mobile in the last quarter of 2013. Traffic started to improve as a result. So although it has been unclear whether this effort has had any positive effect on its important-but-struggling display ad and search ad business, a light might be shed on the matter when the Yahoo earnings report is posted after today’s close.

Moreover, while it’s still a work in progress, investors will also want to pay close attention to the budding online video initiative from Yahoo[4] now that the company appears to be getting serious about it. Rumors of videocasts of live concerts along with plausible chatter of the company getting into original programming — a poke at Netflix (NFLX[5]) — together confirm that YHOO is looking to beef of its online video presence in an effort to beef up its ad sales if not get into the subscription-video business.

The third big talking point that owners of YHOO stock will want to mull over before, during and after the Yahoo earnings call is the outlook for its stake in Alibaba and Yahoo Japan.

YHOO Earnings Expectations

As it stands right now, analysts expect Yahoo to post a net profit of 37 cents per share of YHOO stock for Q1, on $1.08 billion in revenue. That compares less than favorably to last year’s Q1 earnings of 38 cents per share that came on revenues of $1.14 billion.

Results in that range would be right in line with the results that YHOO has been producing since 2011.

Bigger picture, if Yahoo performs as expected for the first quarter, it will be the first step toward bottom line earnings of $1.57 per share for 2014. That’s only a tad higher than the $1.52 per share YHOO earned last year. Sales are projected to reach $4.49 billion for 2014, up just 1.5% from 2013′s $4.43 billion.

It’s an achievable target, but Yahoo is only going to be able to do it by quelling its weakness in its display and search ad business using on the back of more (and better) mobile offerings and wherever it goes with online video.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Endnotes:
  1. YHOO: http://studio-5.financialcontent.com/investplace/quote?Symbol=YHOO
  2. 56% of the world’s populace now owns a smartphone: http://www.digitalbuzzblog.com/infographic-2013-mobile-growth-statistics/
  3. from 6.8% to 5.8%: http://www.forbes.com/sites/petercohan/2014/04/14/market-to-marissa-im-just-not-that-into-yahoo/?partner=yahootix
  4. budding online video initiative from Yahoo: http://techcrunch.com/2014/04/14/yahoo-expands-partnership-with-vevo-bringing-music-videos-to-yahoo-screen-in-u-s-canada-and-germany/?ncid=txtlnkusaolp00000591
  5. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX

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