Is Yahoo’s Stock About to Go for a Ride?

With shares of Yahoo! Inc. (NASDAQ:YHOO) trading at around $19.93, is YHOO an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Yahoo recently beat Q4 expectations thanks to ad prices and overseas investments. Q4 EPS came in at $0.23 versus an expectation of $0.27. Confused? Based on Yahoo’s press release, it would be a beat if South Korea operations and other accounting items weren’t factors. If those factors were excluded, then EPS would have come in at $0.32. As far as revenue goes, it came in at $1.35 billion compared to $1.32 billion for the same quarter last year. FY2012 EPS came in at $1.17 on revenue of $5.08 billion. Guidance was light. Q1 revenue is expected to come in between $1.07 billion and $1.10 billion. Full-year revenue is expected to come in at $4.5 billion to $4.6 billion.

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All of the earnings numbers are important, but the real story here is CEO Marissa Mayer. She has been looked at by investors as a savior, which has a lot do with her Google (NASDAQ:GOOG) pedigree. Her goal is to make Yahoo a premier destination online. The irony here is that this goal has already been accomplished. Yahoo is the fourth-most visited site in the world. The real challenge is how to increase revenue through monetization methods. She has had some success since her tenure was inaugurated. Employee morale is high. It has been reported that 95 percent of employees are optimistic about the company’s future.

There has also been a 10 percent user increase in Yahoo email, an interesting tidbit to be sure. How does email usage increase 10 percent so fast? It’s not likely that people are at dinner parties or playing golf and raving about Yahoo email to their friends and acquaintances. This number can easily be manipulated, but we will give the benefit of the doubt. CEO Marissa Mayer is also focused on mobile and social networking. Focus is great because it’s a start, but we can talk about this more once there are substantial results. She has formed important partnerships with Samsung, Wenner Media, and NBC Sports. In addition to that, she has made improvements to Flickr. Overall, CEO Marissa Mayer seems to be doing well so far, but it’s still too early to judge.

The sale of Yahoo’s stake Alibaba Group led to a $7.6 billion windfall, of which $1.5 billion went to shareholder buybacks at an average price of $18.24. Many people feel as though these buybacks are what have been lifting the stock price, and that the performance of the stock isn’t an accurate indicator of the strength, or lack thereof, of the business. We will touch on this point in the Conclusion section. For now, let’s take a look at some important numbers for Yahoo…

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