Q1 Preview: Will Yahoo! (YHOO) Leave Investors Searching for Answers?

Yahoo! Inc. (Nasdaq: YHOO) is trading lower Tuesday ahead of the company's first-quarter earnings report, expected out after the market close. Shares are down 1 percent at last check.

Yahoo! is expected to report EPS of $0.16 on sales of $1.06 billion. Last quarter, the Sunnyvale, CA-based search and media giant posted EPS of $0.26 on revenue of $1.2 billion ex-TAC, versus consensus EPS of $0.22 on revs of $1.17 billion. Looking back at the first quarter of last year, Yahoo! saw EPS of $0.15 on revenue of $1.16 billion.

Shares fell 0.4 percent through the quarter and are down about 2.5 percent since.

Yahoo! trades at about 17.7x FY12 EPS estimates, compared with 16.4x for AOL, Inc. (NYSE: AOL) and 13.2x for Google, Inc. (Nasdaq: GOOG).

Data from Bloomberg has 15 analysts with a Buy on Yahoo!, 19 with a Hold, and one suggesting to Sell. The analyst price target average is $19.10, with a high of $24 and low of $14. Shares have traded in a range of $18.52 - $12.94 over the last 52-weeks.

Analyst Summary

• Goldman is looking for EPS of $0.22 with revs of $1.067 billion. Goldman says, "we forecast total Display revenue of $548 mn (+11% yoy/-14% qoq) due to flat page view growth yoy and an 11% yoy RPM improvement, versus 4Q page views down 1% yoy and pricing up 14% yoy. We forecast total Search revenue of $626 mn (-26% yoy/-2% qoq), hurt by affiliate losses and Microsoft TAC payments. Pre-Microsoft payments, we look for O&O search revenue to improve 8% yoy/4% qoq due to 3% yoy query growth and 5% yoy pricing growth, improving from +2% and -5% yoy in 4Q, respectively."
  
  Goldman believes substantial cash and Asian assets both protect downside and limit upside to Yahoo!'s stock price. Furthermore, "Conversations with industry professionals suggest upside to Yahoo!’s RPS in 1Q relative to guidance due to the adCenter implementation. We believe Yahoo! is likely to retain its stake in Alibaba group, at least until Taobao conducts an IPO, but believe Yahoo! may divest its Yahoo! Japan stake in the near future, and believe investor response could hinge on the tax efficiency of any transaction."
  
  Goldman maintains Neutral rating and $18 target on Yahoo!
  
  
• Benchmark expects revs of $1.07 billion and EPS of $0.16. Benchmark comments, "Yahoo’s revenue growth remains stalled. But it is consistently generating, and should grow, cash flow. Yahoo’s Asian investments are growing rapidly and comparables garner high multiples."
  
  Benchmark currently rates Yahoo! a Hold with an $18 price target.
  
  
• Wedbush predicts EPS of $0.15 and revs of $1.056 billion. Wedbush expects search revs to decline two-percent sequentially, but pop 11 percent on a Y/Y basis. The firm notes, "Our checks indicate that impressions increased significantly YoY, offsetting the seasonal decline in Cost-per-Impression (CPMs) rates. We believe the overall strength in display advertising should benefit Yahoo! as impression growth outpaced the seasonal decline in CPMs. Our checks indicate that advertising exchanges are experiencing significant impression growth, which could make Yahoo’s advertising exchange the key revenue driver for its Display Advertising Business. However, there is the risk of increasing competition."
  
  Wedbush maintains an Underperform rating and a $15.50 target.
  
  
• BGC Partners sees EPS of $0.15 and revs of $1.031 billion. The firm comments CEO Carol Bartz appears to have gotten her executive team together, but BGC sees "the turnaround process running about a year behind schedule."
  
  BGC says, "We estimate display revenue ex-tac (traffic acquisition cost) is $485 million for 47% of revenue, which is growth of 14% YoY...We estimate search revenue ex-tax of $350M and note that while the company has a level of protection to its revenue via the agreement with Microsoft, the search transition is likely to be a painful process for 2011 and beyond...We do not see that Yahoo is on a course to restore revenue growth in 2012 at a double-digit rate."
  
  BGC maintains a Hold and $17 price target on shares of Yahoo!

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Lowe's (LOW) PT Lowered to $275 at Guggenheim
• CrowdStrike (CRWD) PT Lowered to $227 at Scotiabank
• ZKH Group Limited (ZKH) Reports Q2 EPS of $0.04