Yahoo Trips Over Ad Revenue

Michael Teague  |

Despite a significant increase in earnings, Yahoo! Inc. took a significant loss in late trading after releasing its first-quarter numbers.

Yahoo Inc. (YHOO) reported first-quarter 2013 earnings of $390 million, $0.35 per share, on revenue of $1.07 billion. This was an improvement over the prior year’s Q1, during which the company earned $286 million or $0.23 per share, but shy of analyst estimates that had the company’s earnings forecast as high as $1.1 billion.

The company also projected Q2 net income of $1.06 billion to $1.09 billion, also below analyst forecasts of $1.11 billion.

However, the more disappointing news seemed to be the 11 percent decline from the prior year in revenue from display advertisements (down to $402 million), worse than expectations of a 9 percent decline.

The decrease in revenue coupled with the increase in earnings has been explained by two factors. First, the decreases are mainly in advertising dollars, where Google (GOOG) has a firm hold on the mobile market, with Facebook (FB) doing its best what little is left.

Secondly, a significant portion of the company’s profits are currently being made from investments. The company has a 24 percent holding in the Chinese internet company Alibaba Group, along with its 35 percent stake in the increasingly popular Yahoo Japan. This situation prompted Colin Gillis, an analyst with BGC Partners, to note that the company “is still doing better as an investment house than they are as a company.”

While Gillis expressed some concern over the nature of Yahoo’s stake in the aforementioned companies, especially with regard to how this might affect Marissa Mayer’s turnaround strategy, he defended the new CEO by saying “you have to remember that turnarounds take a long time and we are still in the early innings of that.”

Yahoo’s shares dropped nearly 4.6 percent in after-hours trading to $22.70.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FB Facebook Inc. 162.50 -1.45 -0.88 15,504,415 Trade
GOOG Alphabet Inc. 1,113.65 -8.02 -0.72 1,449,830 Trade
YHOO Yahoo! Inc. n/a n/a n/a 0 Trade
TATT TAT Technologies Ltd. 6.60 0.00 0.00 13 Trade

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