Yahoo’s Third-Quarter Earnings Beat the Bears



Yahoo! (NASDAQ:YHOO) closed Tuesday’s regular session down 1.82 percent at $33.38 per share but edged higher in post-market trading after reporting third-quarter that generally exceeded expectations. Adjusted revenue fell 1 percent on the year to $1.081 billion, in line with the average analyst estimate of $1.08 billion. Adjusted earnings fell 13 percent on the year to 34 cents per share, beating the average analyst estimate of 33 cents per share.

“I’m very pleased with our execution, especially as we’ve continued to invest in and strengthen our core business,” commented CEO Marissa Mayer. “In Q3, we launched new user experiences across many of our digital daily habits — Yahoo Screen, My Yahoo, Fantasy Sports, and more. Now with more than 800 million monthly users on Yahoo — up 20 percent over the past 15 months — we’re achieving meaningful increases in user engagement and traffic.”

Yahoo has had a wild ride on the stock chart over the past year. Shares are up nearly 117 percent over the past 52-week period, and have climbed nearly 70 percent this year to date, leaving both the S&P 500 and its competitors in the dust. The S&P has returned a comparatively unattractive 18.75 percent over the past year, and Google’s (NASDAQ:GOOG) 18.24 percent growth is equally underwhelming.

Paid clicks at Yahoo increased 21 percent, the seventh consecutive quarter that paid clicks have increased. However, price-per-click continued to decline, falling 4 percent.

Similarly, Yahoo reported a 1 percent increase in the number of display ads sold, but a 7 percent decrease in the price-per-ad. Overall search revenue (excluding traffic acquisition costs) is up 3 percent on the year, but ex-TAC display revenue is down 7 percent.

It wouldn’t necessarily be fair to say that Yahoo is winning the advertising and search fight against Google and Facebook (NASDAQ:FB), but it certainly isn’t losing. Yahoo has shifted a lot of its focus to mobile, an area that both Facebook and Google are also still figuring out.

Yahoo 3

Yahoo’s success over the past year is the result of many things. The company has been aggressively refreshing services that have seen significant changes in nearly two decades, which has made the firm’s entire ecosystem enormously more attractive. Mayer has led the company on an ambitious acquisition spree, picking up companies such as Bignoggins, Qwiki, Xobni, Admovate, Ztelic, Lexity, Rockmelt, IQ Engines, and most recently a company called Bread.

Looking ahead, Yahoo is expecting fourth-quarter revenue in a range between $1.18 and $1.22 billion, slightly below the current average analyst estimate of $1.25 billion. For the full fiscal year, Yahoo is expecting revenue in a range between $4.4 and $4.45 billion, also slightly below the current average analyst estimate of $4.48 billion.

Yahoo Outlook


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