Tags: Yahoo | Results | Stake | Alibaba

Yahoo's Results Get a Lift from Stake in Alibaba

Tuesday, 15 April 2014 05:04 PM

Yahoo! Inc. forecast second-quarter sales that met some analysts’ estimates, as Chief Executive Officer Marissa Mayer continued to benefit from the company’s stake in Alibaba Group Holdings Ltd.

Yahoo shares soared as much as 10 percent in extended trading after the company reported first-quarter earnings, which included strong results from Alibaba. Yahoo’s financials contain Alibaba results because the Sunnyvale, California-based Web portal owns about 24 percent of the Chinese e-commerce company. Alibaba posted a 66 percent sales surge in the final quarter of 2013 ahead of a potential U.S. initial public offering.

Yahoo, based in Sunnyvale, California, also projected second-quarter sales, excluding revenue passed to partner sites, of $1.06 billion to $1.1 billion. That was in line with analysts’ average estimate of $1.08 billion, according to data compiled by Bloomberg.

Mayer, almost two years into her tenure, has revamped services and added content to attract users and the advertisers that follow them. Yet the company’s core business is still showing anemic growth, even as investors have bought into the stock to get a piece of Alibaba’s results.

Alibaba’s Strength

“The Alibaba numbers were very, very strong,” said Brian Wieser, an analyst at Pivotal Research Group, who has the equivalent of a hold rating on the stock. “It’s certainly a very strong positive for Alibaba — and for Yahoo.”

Yahoo shares rose to as high as $37.70 in extended trading, and at 5 p.m. in New York were up 7 percent at $36.59. The shares gained 2.3 percent during the regular session. The stock is down 15 percent so far this year.

For the first quarter, sales, excluding revenue passed onto partner sites, was $1.09 billion, up from $1.07 billion a year earlier, the company said in a statement Tuesday. That compared with analysts’ average estimate of $1.08 billion, according to data compiled by Bloomberg. Profit, minus items such as stock-based compensation, was 38 cents a share, while analysts had projected 37 cents a share.

The first-quarter sales gains were the first from Yahoo since the fourth quarter of 2012.

Optimism around Alibaba’s valuation helped spur an upgrade of Yahoo’s stock Tuesday by Ben Schachter, an analyst at Macquarie Securities USA Inc. The Chinese company could be valued at $160 billion to $180 billion at its IPO, he wrote in a note in which he raised Yahoo’s rating to the equivalent of a buy from a neutral after the shares pulled back recently.

Core Inconsistency

“This is clearly a trading call not, in any way, a positive call on Yahoo’s core fundamentals,” Schachter wrote, putting the company’s price target at $40.

Mayer, after redesigning the company’s services, is adding more professional content to woo users. That’s included hiring high-profile journalists and executives. Earlier this month, the company said it would add a leading name in cosmetics, Bobbi Brown, to be its editor in chief of beauty coverage. Katie Couric recently joined to bolster Yahoo’s video efforts and former New York Times columnist David Pogue came aboard to lead technology coverage.

More professional content could be on the way. Yahoo is considering adding high-quality, longer-form video shows that would have multiple episodes, according to people with knowledge of the matter. That would come after striking deals to show other premium content, such as past episodes of “Saturday Night Live,” and backing some shorter-form, including Tom Hanks’s animated series “Electric City.”

The push for more entertainment comes after the company improves its tools for advertising on its services. That includes a feature to help clients better target audiences and an advertising exchange that gives advertisers more tools to manage promotions.

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Yahoo! forecast second-quarter sales that met some analysts' estimates, as Chief Executive Officer Marissa Mayer continued to benefit from the company's stake in Alibaba Group Holdings.
Yahoo, Results, Stake, Alibaba
Tuesday, 15 April 2014 05:04 PM
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