Hello all,
Here is an exerpt for Yahoo's most recent 10-Q:
"The Company currently expects to significantly increase its operating expenses to expand its sales and marketing operations, to fund greater levels of product development, and to develop and commercialize additional media properties."
This is sound strategy and here's why:
Due to Yahoo's agressive growth strategy, fueled and initiated by their gangbusters IPO, and maintained by very strong sales growth (695% annual), the average number of page views of Yahoo's content per day have increased from 9 million per day in Jun. '96 to 20 million per day in Dec. '96. According to PC-meter, Yahoo's market reach is at 38.7%. In other words, 38.7% of internet users are utilising Yahoo's content.
In the past year the number of households using the internet in the U.S. has increased from 4.3 million to 11.0 million. Yet at 11 million, this is still only 11% of the households in the U.S., i.e. there is much room for growth. Yahoo is a growth stock like I've never seen before, yet they are not in debt. They are supporting their growth. Once established, this thing's gonna make mucho dinero.
This is why they pull such cash:
"Another important lesson we have learned from the PC meter data base is the power of hot links, particularly when they are in premier positions on high reach sites such as PC meter's number one site, aol.com. In February disney.com promoted itself heavily via America Online. Look at how it created an audience. This really put disney.com on the map. And disney.com was able to retain much of its audience in March and thereafter, without this important link."
Ref. npd.com PC-meter (internet marketing analyst) You'll have to follow the link to see the graph.
Advertisement is what's going to make the internet swing, and Yahoo is going to take one healthy piece of the pie if they continue on this path.
Why a P/S ratio of 40 is justifiable for Yahoo:
"The market's price tag is based on past history, present circumstance, and future projections, all of which vary from company to company."
Ref. The Motley Fool Investment Guide - Gardner and Gardner
It doesn't make sense to compare Yahoo's P/S to microsoft's because they are in different stages of developement, and the market has different expectations of what their long term growth will be. Microsoft's LT future growth is 25% annually - First Call consensus estimate. You don't have to be a betting man to see that Yahoo's LT growth is conservatively 4 times better than that.
Best Regards,
Kevin
P.S. You're right about the discussion of ideas. Forgive me, I'm an excitable guy. |
