Yahoo earnings: All eyes on Alibaba
This will not be the quarter Yahoo finally begins showing new signs of life, say analysts. But for investors, it won’t matter, because Tuesday’s earnings announcement is all about Chinese web portal Alibaba.
Analysts expect flat earnings and revenue from Yahoo, which announces earnings Tuesday after 4 p.m. ET. Yahoo owns 23% of Alibaba, which is expected to sell shares to the public with a high-profile IPO, set to launch in August.
As part of the IPO, Yahoo will sell a portion of its stake and “the question is: what will Yahoo do with the proceeds?” asks Sameet Sinha, an analyst with Los Angeles based B. Riley.
Investors, he adds, want to see the cash returned to them in the form of dividends and not used to make big acquisitions, like Yahoo’s $1 billion purchase of blogging site Tumblr in 2013, which has yet to produce a big cash bonanza.
“Investors want to see returns starting immediately,” he adds.
Last quarter, Alibaba’s 66% jump in revenue dazzled investors and sent Yahoo shares up 11% in after-hours trading. For the second quarter, Yahoo is forecast to rake in $1.1 billion in revenue and report earnings per share of 37 cents.
Former Google superstar Marissa Mayer joined Yahoo as CEO in July 2012, with the mandate to finally turn around the web icon, which was one of the first major Internet companies but lost luster to Google, Facebook and others.
Yahoo is still a huge destination for e-mail, news and gossip — the No. 2 site with 192 million U.S. visitors in May to Google’s No. 1 ranked 193 million, according to market tracker comScore.
Martin Pyykkonen, an analyst with Rosenblatt Securities, says Yahoo’s vast user base is great but “we need to see more evidence of usage/engagement increases” this year. “Usage more than users is a far more relevant metric for advertisers’ spending-allocation decisions,” he says.
Since joining Yahoo, Mayer has put her attentions to high-profile deals with the likes of former CBS Evening News anchor Katie Couric and former New York Times columnist David Pogue, and reviving the canceled NBC sitcom Community to run on Yahoo. The series begins in the fall.
Those deals “are nice,” says James McQuivey, an analyst with Forrester Research, “But they don’t put Yahoo into the game the way they should.”
He’d like to see Yahoo exploring devices and new technologies, as Amazon did with its new Fire smartphone, and Google did with its purchase of Nest, the digital thermostat.
“I don’t see the turnaround happening just yet.”
Yahoo stock closed Monday at $35.70 a share, up 27 cents.
Source: Usatoday
