Earnings, upgrades carry Yahoo higher

Jan. 2, 2002 4:43 p.m. PT

2 min read

Yahoo! rose Thursday morning after analysts boosted its earnings euphoria with more bullish coverage.

Shares were up 7 13/16 to 183 9/16, or 4 percent, the day after the company posted better-than-expected third quarter earnings. Several analysts followed the news with positive comments.

James Preissler of Paine Webber said he would maintain a "neutral" rating on Yahoo! but increased his 12-month price target to $195 from the previous $155. Deutsche Banc Alex Brown and E*OFFERING raised their ratings from "buy" to "strong buy". Robinson Humphrey upgraded to "short term buy" from "short term hold". Warburg Dillon Read also raised its price target on the stock from $180 to $210.

Yahoo! reported earnings of 14 cents a share, ahead of Preissler's estimate of 10 cents a share, and the Street's consensus of 9 cents a share. Revenue also grew 20.6 percent versus the June quarter, to $155.1 million, pro forma including the broadcast.com acquisition in both Q2 and Q3. Preissler's revenue estimate had been $138.6 million.

Average daily page views for Yahooo! totaled 385 million in the month of September, a 24.2 percent increase from June. Noteworthy contributions came from Japan and the auction business -- 33 million of page views from Japan (a strong 50 percent increase from June) and an estimated 16 million daily page views in September and about 7.5 million in June from the auction site.

On the basis of these results, plus positive surprises on gross margins and operating margins, Preissler increased his forward-looking targets. He also noted Yahoo!'s balance sheet remained very solid. The company finished the quarter with $791 million in cash, up from $680 million in June, still with no debt.

Preissler said his revenue estimate for the December quarter is now $188.6 million, up from $157.9 million, and estimated 2000 revenues will be $873.8 million, up from $751.4 million. Earnings estimates have been raised 16 cents a share from 11 cents a share for the fourth quarter, and to 70 cents a share from 52 cents a share in 2000.

Preissler was also optimistic on the outlook for the holiday e-shopping season. "We believe Yahoo is making a transition from an e-commerce model that focuses on hosting merchant sites to one that increasingly monetizes transactions.we expect e-commerce revenues to increase as a percent of total revenues," he wrote in a report.