Covered here are Internet stocks Amazon (AMZN), Baidu (BIDU), eBay (EBAY), Google (GOOG) and Yahoo (YHOO) with analysis on where these Internet stocks are valued in relation to each other and which offer the most upside versus current 2010 targets.
Online retailer Amazon (AMZN) started out as a bookseller but has become the online seller of choice for a plethora of goods. The company’s latest venture is e-books, and the success of their Kindle reader has helped it capture the imagination — and the business — of bibliophiles everywhere.
Evidence of the Kindle’s positive effect on Amazon’s bottom line was seen in the company’s latest earnings report. In late January, the retailer reported a monster quarter, with earnings vaulting 71% in the quarter due largely to strong holiday sales. And though the company doesn’t release sales data for the Kindle, experts estimate that at least 2 million Kindles were sold in 2009. According to analysts polled by Thomson Reuters, the consensus 2010 earnings per share outlook for Amazon is $2.91, and the consensus 2010 price target for the stock is $164.74. At its current value of $118.61, the full-year target seems a bit high. And despite the Kindle’s success, Amazon faces what could prove daunting competition in the e-reader space from Apple (AAPL
) and its new iPad.
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Baidu (BIDU) is a truly interesting Internet stock, not particularly because of what it does (it’s a search engine), but because of where it does it. The company is the No. 1 search engine in China, a country where the total number of Internet users is more than the total population of the U.S. In early February, Baidu reported a 48% rise in fourth-quarter profits, and a key reason was the performance of its new Phoenix Nest ad system. There was concern in late 2009 that the Phoenix Nest wouldn’t work as planned, but those fears were squelched with Baidu’s Q4 numbers.
Consensus EPS for the full year on Baidu is $9.53, and the consensus price target for the year is $514.06. But the stock already trades at $516.63, so the consensus here is likely way too low. The growth of the Chinese Internet market is staggering, and as more and more Chinese increase their standard of living, the more they’ll continue developing an online life. Baidu is the key beneficiary here, especially now that its chief competitor Google’s (GOOG) has issues with the Chinese government.
One thing the Internet has proven is that an old business model can work big time in cyberspace. Such is the case with online auction site eBay (EBAY). The company is one of the Web’s biggest success stories, and the stock has delivered big for investors over the past year with a 96% gain. In term of earnings, eBay also had a solid fourth quarter, beating both top- and bottom-line estimates on strong performance of its PayPal division. The company also shed its Skype Internet telephone business.
eBay’s full-year 2010 EPS forecast was in line with analysts’ estimates for EPS of $1.67. As for the stock’s 2010 price target, analysts expect the shares to hit $27.54 on average, well above the current trading price of $22.94. If eBay can continue its current restructuring efforts, and if the consumer cooperates, the company could reach the consensus price target — although this will be no means be an easy task.
The world’s biggest Internet search engine firm is Google (GOOG), and they’ve proven that some really smart programming and a streamlined interface can do wonders for a company’s bottom line. Google’s numbers are really remarkable, especially recently. In January the company reported a 17% rise to $6.67 billion in the fourth quarter over the prior year’s quarter. More importantly, their ad sales have recovered after the recent recession, and are now better than they’ve been since 2008.
Consensus 2010 EPS for the company is $27.37, and the 2010 price target for the stock is $678.31. And while those estimates do indeed represent big numbers, they are numbers quite achievable for Google if it can continue its current growth, and if it can build on the early success of its Android smart phone operating system.
Our final Internet player also is Google’s top rival, Yahoo (YHOO). The search engine firm used to be the gold standard in the Internet space, but in recent years it’s been fraught with all kinds of difficulties, not the least of which is the dominant competition from Google. But Yahoo realizes it’s in a tough spot, and over the past year it has mounted a turnaround effort that includes selling off non-performing assets, and teaming up with Microsoft (MSFT) in the search and advertising business. At least one prominent investor is very bullish on Yahoo’s turnaround efforts, and that’s billionaire George Soros, who quadrupled his YHOO holdings in the fourth quarter to 3.5 million shares.
As for the consensus forecasts for Yahoo in 2010, the Street expects earnings per share for 2010 to come in at $0.47, with a 2010 price target of $19.35. That price target represents a sizeable move upward from the current share price of $15.34, but if Yahoo can expertly manage its turnaround effort, it could be the dark horse winner in the Internet sweepstakes.
