Yahoo posts solid Q2, raises outlook
By Bambi Francisco, CBS.MarketWatch.com
Last Update: 5:44 PM ET July 10, 2002
(At least people are still using the Internet...)
marketwatch.com
SUNNYVALE, Calif. (CBS.MW) -- Yahoo reported its first quarterly profit after six straight losing quarters, as expected, and posted sales Wednesday that topped expectations.
Ahead of the news, Yahoo shares (YHOO: news, chart, profile) fell 4 percent to $12.19 in regular trading. Shares rose 3 percent to $12.58 in after-hours trading action.
After the close Wednesday, Yahoo said it earned $21.4 million, or 3 cents per share. Yahoo lost 9 cents last year. Analysts expected Yahoo to earn 2 cents per share.
Yahoo generated sales of $225.8 million vs. the consensus expectation of $215 million, but near the upper end of the range of $205 million to $225 million given in April. It's also up from $182.17 generated in the same period a year ago.
Online advertising came in at $135.7 million, down 4 percent from $140.9 million last year, but better than the 14.8 percent decline reported in the first quarter. Additionally, online advertising exceeded at least one estimate of $131 million.
Online advertising accounted for 60 percent of total sales, down from 63 percent in the first quarter.
It's unclear what percentage of the marketing/advertising sales came from sponsored search fees Yahoo generates from its relationship with Overture (OVER: news, chart, profile). This partnership was renewed in April. Much of the revenue generated from this business falls directly to Yahoo's bottom line.
The company ended the quarter with 1 million paying customers primarily due to interest in Yahoo personals and additional Yahoo e-mail services, such as extra storage, said Yahoo CFO Susan Decker, on a conference call following the release. The Internet access subscriber fees should be the leading contributor by the end of the third quarter, Decker added.
"We've turned the corner," said Yahoo CEO Terry Semel, on the conference call following the release. "We'll have a chance to pass 2 million [paying customers] by the end of the year."
Going forward
In the third quarter, Yahoo expects sales to be between $225 million and $250 million.
For the full year, Yahoo raised sales expectations by 3 percent at the high end to between $900 million and $940 million. In April, Yahoo said it expected to generate between $870 million and $910 million in sales.
Yahoo said it expects to generate cash flow $140 million and $165 million. In April, Yahoo said that it expected cash flow to be between $105 million and $130 million for the full year. See Yahoo release.
Price to pay?
Fred Moran, an analyst at Jefferies & Co., is maintaining his $10 stock price. Moran points out that even if Yahoo grows its most aggressive expectation for cash flow by 30 percent in 2003 to $214 million, this would mean that Yahoo's enterprise value of just over $5 billion is 25 times 2003 cash flow. Even though Yahoo does not have a enormous capital expenditures like media companies, it still trades at a rich premium to them. On the same metric, AOL Time Warner (AOL: news, chart, profile) trades at 8 times; Walt Disney (DIS: news, chart, profile) trades at 12 times while Viacom (VIA: news, chart, profile) trades at 11 times, according to Moran.
wbmw |
