Analyst Thoughts On Yahoo! (YHOO) After Q4 Results

A number of analysts are commenting on Yahoo! (Nasdaq: YHOO) today following fourth quarter results after the close. The Internet search company reported fourth-quarter earnings of 15 cents per share, 4 cents better than the analyst estimate of 11 cents per share. Yahoo! earned 21 cents per share in the year-ago quarter. Revenue for the quarter was $1.26 billion excluding TAC, just ahead of the $1.23 billion that the market had anticipated. In the year prior the company made $1.3 billion excluding TAC. Shares of Yahoo! are up 1.25% today.

• Piper Jaffray: "The bottom line is that Yahoo! posted Q4 earnings above Street estimates ($0.11 on $1.26B vs. the Street at $0.11 on $1.23B), which we believe demonstrates an ad recovery is already underway. We continue to expect Yahoo! to be a significant beneficiary in the ad recovery, particularly on the premium display side. We now expect Yahoo!'s display revenue to grow 9% in 2010 versus our prior estimate of 5% growth." Reiterate Overweight rating, $20 price target.
  
  
• FBR Capital: "Yahoo! reported 4Q net revenue slightly above consensus expectations, with GAAP EPS in line, as revenues declined as expected and costs in the quarter came in slightly higher than forecast. Adjusted revenue declined -5% YOY (versus -7% last quarter), as both search and display revenue continued to decline on the back of the company's ongoing share losses. The starkest figure in the results was the 23% YOY decline in revenue per search, particularly when compared to the 5% increase in revenue per paid click at Google. While the rate of decline has slowed somewhat, we believe the continued share loss in search and key verticals is likely to continue to drive underperformance at Yahoo!. While the balance sheet assets should provide significant valuation support and even potential upside in the case of Alibaba Group, we believe it will take progress in user growth and engagement for upside in the valuation attributable to the core business to materialize." Maintains Underperform, $16 price target.
  
  
• Broadpoint.Amtech: "YHOO put up a relatively solid quarter. There were some positives and some negatives, but we think that the most important take-away is the fact that management is building credibility with the Street (at least in terms of beating numbers). Both revenue and adjusted operating income beat the high-end of guidance. The display business trends were solid, up 26% q/q and basically flat y/y. There is certainly an argument that the display business should have been higher given the macro trends, but we think most investors will be pleased with the performance relative to muted expectations." Maintains Buy rating, $21 price target.
  
  
• Susquehanna: "Yahoo!'s 4Q09 results and 1Q10 outlook were mixed, but given the nervousness around the numbers, that may be sufficient for the stock. To this end, we saw a modest tick upwards in the aftermarket last evening. Based on these results, there is no change in our outlook and we did not see anything that would materially alter the bull or bear positions in the stock." Maintains Neutral rating.
  
  
• Deutsche Bank: "...we believe the weakness in the O&O search business will overshadow the expected recovery of online display ads. The O&O ad business underperformed expectations in 4Q, only for revs to be made up from the affiliate business. Highlighted by paid inclusion only now going away, Yahoo! continues to overhaul the business, a trend that will likely persist here in 2010 during the recovery of the online ad market." Maintains Hold rating, $16 price target.
  
  
• Kaufman Bros.: "Strong display, but weaker search" Maintains Buy, $20 price target.
  
  
• Collins Stewart: "Yahoo! reported a Beat Rev & EBITDA and largely In-Line Dec quarter. We are encouraged by the tailwind Yahoo! has been getting into '10 in its display advertising business. Yahoo's ability to improve RPS not only becomes a source of accelerating growth, but also sets the minimum RPS guarantee bar higher for future MSFT search deal. We believe that a tailwind in Yahoo!'s core business, improving RPS, and series of milestones in MSFT deal (e.g. regulatory approval, search related cost cutting, deployment of Bing etc.) translate into NT catalysts and LT improving fundamentals. Additionally, we see sizable margin improvement independent of MSFT search deal because of accelerating rev growth and non-search related cost cutting initiatives by new management team. Though we would not read too much into the reasons for Yahoo!'s 2nd analyst day in less than a year in May '10, discussing/providing more color on MSFT search deal post likely regulatory approval is clearly a possible reason (could be another positive catalyst)." Reiterate Buy, $22 price target.
  
  
• Goldman Sachs: "Yahoo!’s display advertising revenue is turning, if not as fast as we forecast...Search activity is performing slightly worse than we thought...Yahoo!’s guidance implicitly calls for a lower EBITDA margin in 1Q, which we attribute to conservatism, but also to intra-quarter hiring." Maintains Neutral rating
  
  
• JANCO: "...generally in line 4Q09 results after the market close yesterday. There were isolated positives in Yahoo!'s 4Q09 results, but overall it is still a work-in-progress in terms of regenerating meaningful revenue growth. Yahoo! clearly stated its intent to pursue attractive M&A opportunities, which we believe would best be targeted towards small/medium size deals focused on purpose-built Internet content." Maintains Market Perform, $16 price target.
  
  
• Benchmark: "Yahoo reported solid 4Q results and provided cautious 1Q10 profit guidance. Management was generally upbeat about 2010 prospects. We believe the stock remains attractive given the likelihood of further ad market recovery, but we remain somewhat concerned about search share losses, audience fragmentation and management’s Internet savvy. As such, we adjust our valuation multiple to align it with traditional media stocks like CBS and Disney, or 8x-9x 2010E operating income before depreciation and amortization (OIBDA, or EBITDA)." Maintains Buy rating, price target lowered from $20 to $18.

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