Yahoo (YHOO) Fundamentals Remain Weak But The Sale Prices The Stock - Needham

Needham & Company analyst, Laura Martin,reiterated her Buy on Yahoo! (NASDAQ: YHOO) after the company reported earnings and her sum of the parts valuation suggested 50% upside. The key to the call was management commentary on the sale process which appears to be progressing. No change to $40 PT (despite sum of the parts analysis) or Buy rating.

YHOO reported 1Q16 revenue (ex-TAC) of $859mm (down 18% y/y), Adjusted EBITDA of $147mm (down 36% y/y) and Non-GAAP EPS of $0.08 (down 45%). YHOO’s CEO, Marissa Mayer, had several prepared remarks assuring investors that the sale process was proceeding on schedule and that management was being cooperative (unlike press commentary). Other good news from 1Q16 was that MAVENs revenue grew 7% y/y to $390mm (representing 36% of total GAAP revenue), and mobile revenue reached $260mm (24% of total GAAP revenue).

Fundamentals remain weak. Search revenue globally (45% of total revenue) fell 7% in 1Q16, driven by 21% lower paid clicks, offset somewhat by 7% higher price per click. Display revenue (43% of total revenue) sold 8% more ads, which offset a 6% price decline per ad (driven by the shift from premium toward programatic). YHOO now sells 70% of its display advertising programmatically.

For an analyst ratings summary and ratings history on Yahoo! click here. For more ratings news on Yahoo! click here.

Shares of Yahoo! closed at $36.33 yesterday.

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