) has seen its shares lag in 2014 as investors await the Alibaba
IPO. This Zacks #5 Rank (Strong Sell), however, is struggling to
grow earnings with negative growth expected this year and next.
Yahoo is a leading Internet content provider and one of the top
destinations on the web. It also owns about a 23% stake in the
Chinese company Alibaba which is scheduled to go public in
September in what will likely be the largest IPO ever.
And while Yahoo will reap the rewards from that investment, and
will share that with shareholders, analysts aren't too excited
about the rest of Yahoo's business right now.
Second Quarter Results Brushed Off
On July 15, Yahoo reported second quarter results and met the Zacks
Consensus Estimate of $0.30.
Analysts didn't like what they saw as display advertising price per
ad declined year-over-year for the sixth consecutive quarter.
Yahoo also guided lower on revenue for the third quarter.
But don't worry, there's Alibaba. Its revenue in the second quarter
jumped 46% year-over-year, soothing the worry warts who were
concerned with the 39% revenue growth in the first quarter which
seemed "light" compared to prior quarters.
Earnings Estimates Cut for 2014 and 2015
The analysts love the Alibaba part of Yahoo. But in the meantime,
they have been slashing Yahoo's earnings estimates for both 2014
4 estimates have been cut for 2014 in the last 2 months, pushing
the 2014 Zacks Consensus Estimate down to $1.06 from $1.30.
The cuts to 2015 have been even more extreme as the Zacks Consensus
has almost been cut in half to just $0.87 from $1.51.
That is negative earnings growth of 18% for both years.
It's not moving in the right direction on earnings.
Shares On Hold in 2014
Shares of Yahoo rallied in 2013 on hope that the latest CEO,
Marissa Mayer, would turn the company around.
But in 2014, shares have gone nowhere.
Yahoo isn't exactly cheap either. It trades with a forward P/E of
Certainly, Internet companies tend to be on the more expensive side
but usually investors are paying for the earnings growth. Right
now, that's nowhere to be found at Yahoo.
If you really want to own an Internet content provider, you should
) instead. The Chinese company is expected to grow earnings by 22%
this year and another 41% next year.
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