Yahoo posts mixed results
Yahoo posted adjusted earnings of 9 cents per share, which was in line with the consensus estimate. Net revenue came in at $841 million, which was a little higher than what Wall Street was expecting. Adjusted EBITDA was $172 million, handily beating the consensus of $148 million.
Net display ad revenue declined 3% from last year to $396 million, but this was still better than the consensus of $381 million. Yahoo recorded a 9% increase in the number of display ads sold, although price per ad declined 15%. Net search ad revenue declined 24% to $319 million, which missed the consensus of $332 million. Paid clicks also fell 24%, although price per click rose 8%. Mavens revenues declined as a result pricing pressure in video and weak demand on the company’s third-party ad network, noted William Blair analysts.
Nomura analyst Anthony DiClemente maintained his Neutral rating and $39 per share target price for Yahoo shares. He described the company’s revenue trends as “tepid sequentially” as a result of pricing pressure across both search and display ads. He noted that the company’s results benefited from the 20% reduction in headcount as it continues to focus on controlling costs.
Yahoo management had nothing to say about the potential sale of the core business or any other strategic options. However, DiClemente noted that media reports suggested that Monday was the final day possible suitors could submit bids for the core business. He estimates that the business could bring in a little more than $5 billion. He added that selling the core business “would accomplish management’s long stated objective of realizing the tax efficient separation of YHOO’s core operations and its $32bn stake in BABA.”
Yahoo affected by the sale process
Credit Suisse analyst Stephen Ju believes that the second quarter earnings report suggests that the sales process is weighing on Yahoo’s business. He continues to be watching and waiting to see what might be come of the company as it evaluates strategic options. He still sees “some amount of low-hanging fruit” for the company to be able to unlock value, such as its relationship with Google. He also believes it could do some things to become more aggressive in its monetization of properties like Tumblr. He continues to rate Yahoo at Neutral with a $47 per share price target.
Yahoo shares edged higher by as much as 0.5% to $38.14 during regular trading hours on Tuesday.
