Yandex NV (NASDAQ:YNDX) stock is spiking today after the Russian search engine company filed a complaint with regulators against Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL).
YNDX stock also reported fourth-quarter earnings that pleasantly surprised: Revenue jumped by 21% and earnings per share came in at 22 cents, topping the 20-cent consensus estimate by 10%.
Yandex stock opened with 6% gains on the news, though its performance has slowly drained throughout the day.
It’s a much-welcomed reprieve for Yandex stock investors, who have watched in horror over the last year as YNDX erased nearly 60% of its value. By comparison, the S&P 500 (INDEXSP:.INX) is up about 14% over the same period; yesterday it closed at an all-time high.
It’s about time YNDX stock started coming around. While it’s certainly no blue-chip, it’s looking like one of the better contrarian stocks to buy in today’s market.
Yandex NV’s Beef With Google Inc
While investors are justifiably excited about Yandex’s earnings report, the rivalry betwen YNDX and GOOG may be the singular most important dynamic affecting Yandex’s future growth prospects.
Like every other search engine in the world, YNDX is angry with Google, which dominates global market share in the industry.
While tensions are certainly high between the U.S. and Russia, GOOG hasn’t yet suffered the fate it succumbed to in China: With GOOG refusing to censor search results in the communist country, China banished Google from its lands. Baidu Inc (ADR) (NASDAQ:BIDU) became the market leader by default.
So, despite frigid relations between Russia and the U.S., both Yandex and therefore YNDX stock must still compete with the mighty GOOG.
What YNDX is admitting by filing this antitrust complaint is that it cannot, in fact, compete with the mighty GOOG. Not because Google is the superior service, but, according to the complaint, because GOOG is using its sway to illegally strong-arm handset makers into making Google the default search service on Android phones.
The YNDX allegations state that GOOG gives Android phone manufacturers an ultimatum: If they want to install the Google Play store — the most prevalent and best-stocked app store on Android — they’ve got to make Google the default search engine, too. And while they’re at it, manufacturers have to install the full range of Google Mobile Services which includes Gmail, Google Translate, Youtube, and other features.
If Yandex’s complaint holds an audience with Russian regulators it could spark a reversal in a disturbing trend for YNDX stock in which Yandex’s Android market share in Russia tumbled from 52% to 44% in the past year.
A Rising Ruble Lifts All (Russian) Boats
While GOOG is easily the biggest competitive threat to YNDX stock, the recent glaring weakness of the Russian ruble may be the most intimidating threat to U.S. investors.
When the ruble/USD exchange rate was at its most favorable for Russia in the last year, $1 could buy you 33.5 rubles. Since then, Russia’s invasion of Ukraine, plunging oil prices, and widespread economic sanctions have resulted in an exodus from Russia’s currency. Meanwhile the dollar has only strengthened, and on Wednesday $1 could buy you more than 60 rubles — 80% more than the exchange rate allowed for just last year.
But with oil prices on the rise again and a ceasefire in place between Russia and Ukraine, YNDX stock may finally be able to recover from the pain of the ruble/USD exchange rate.
With more favorable exchange rates, increased scrutiny on GOOG, and an encouraging earnings report, contrarian investors with a healthy dose of risk tolerance should consider YNDX stock a strong buy.
As of this writing, John Divine owned shares of GOOG stock and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
