Yandex (YNDX) Up 13.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Yandex (YNDX). Shares have added about 13.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Yandex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Yandex's Q2 Earnings Beat, Revenues Miss Estimates
Yandex reported second-quarter 2020 adjusted earnings of 9 cents per share, beating the Zacks Consensus Estimate by 80%. However, the figure was down 66.6% year over year from 27 cents per share.
Revenues of $591.9 million (RUB 41.4 billion) lagged the Zacks Consensus Estimate of $594.7million. The figure remained flat on a year-over-year basis in ruble terms.
Sluggishness in the company’s advertising and ride-hailing businesses owing to coronavirus-led disruptions were concerns during the reported quarter. Further, weak performance of Search, Classifieds, and Other Bets and Experiments segments was a headwind.
Nevertheless, Yandex’s strong momentum across the FoodTech business and Media Services benefited the second-quarter results. Additionally, the company’s strengthening B2B logistics services were tailwinds.
Total online advertising revenues were RUB 24.8 billion (60% of total revenues), reflectinga decline of 15% on a year-over-year basis.
This decline canprimarily be attributed todeclining advertising spending due to coronavirus pandemic. This, in turn, resulted in weak performance of Yandex properties that generated RUB 20.4 billion (82.5% of total advertising revenues), declining 11% year over year.
Further, softness in the advertising network, which generated RUB 4.3 billion (17.5% of the total advertising revenues), was a negative. The figure slumped 31% from the year-ago quarter.
Taxi revenues of RUB 12.5 billion (30% of total revenues) surged 42% on a year-over-year basis, driven by strength FoodTech services, which negated adverse impacts of coronavirus on the ride hailing business.
Other revenues of RUB 4.2 billion (10% of total revenues) surged 21% from the prior-year quarter. This was primarily driven by well-performingMedia Services, expanding cloud business and strong IoT initiatives, which offset sluggishness in Yandex.Drive.
Segments in Detail
Search and Portal: The segment generated RUB 25.5 billion revenues (61.5% of total revenues), down12% year over year. This was primarily due to softness in the advertising business on account of the coronavirus pandemic.
Nevertheless, the company sustained a strong position in the Russian search market. Notably, its market share was 59.6% during the reported quarter, up 270 basis points (bps) year over year. This can be attributed to expanding Yandex’s mobile search share. Notably, mobile revenues accounted for 51.3% of the company's search revenues. Further, mobile search traffic accounted for 56.6% of total search traffic. This was driven by Yandex’s search share on Android, which came in at 57.5%, expanding 520 bps from the year-ago quarter.
Taxi: The segment generated RUB 12.5billion revenues (30% of revenues), surging 42% from the year-ago quarter. The impressive year-over-year growth was driven by positive contributions from Yandex.Lavka and Yandex.Eats, which benefited its FoodTech services during the quarter under review. This weighed on the negative impacts of coronavirus on ride hailing business. The number of rides declined 6% from the prior-year quarter. Nevertheless, Yandex witnessed strong performance by its corporate Taxi business.
Classifieds: The segment generated revenues of RUB 886 million (2.1% of revenues), reflecting a decline of 32% year over year. This was due to sluggish real estate demand and closure of auto dealerships on account of the ongoing pandemic.
Media Services: The segment generated revenues of RUB 1.7 billion (4.1% of revenues), soaring94% from the year-ago quarter. This can primarily be attributed to solid momentum across KinoPoisk and Yandex.Music, which generated strong subscription revenues.
Other Bets and Experiments: The segment accounted for revenues worth RUB 2.8billion (6.8% of total revenues), down18% from the prior-year quarter. This was due to suspension of car-sharing services, which led to weak performance of Yandex.Drive in the reported quarter.
In second-quarter 2020, adjusted net income margin was 4.6%, contracting 950 bps from the year-ago quarter.
Its operating margin came in at 0.5% in the reported quarter, contracting from 17.2%in the year-ago quarter. This was owing to declining advertising revenues and increasing investments.
Further, adjusted EBITDA margin was 20.5%, which contracted from 31.6% in the prior-year quarter.
Operating expenses — as a percentage of revenues — was 99.5%, expanding from 82.8%in the year-ago quarter.
The company’s total traffic acquisition cost amounted to RUB 4.2 billion, declining 25% on a year-over-year basis. As a percentage of revenues, the figure contracted 340 bps year over year to 10% in the reported quarter.
Balance Sheet & Cash Flows
As of Jun 30, 2020, cash and cash equivalents were $2.6 billion, up from $1.6billion on Mar 31, 2020.
Accounts Receivables totaled $230.7million, decreasing from $216.7 million in the previous quarter.
In the second quarter, cash used in operations was $1.9 million compared with $99 million of cash generated from operation in the prior quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -26.25% due to these changes.
At this time, Yandex has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Yandex has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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