Yahoo! Inc. (NASDAQ:YHOO) has recently taken off significantly after sluggish share performance in the past several years. Since the beginning of September 2012, Yahoo! Inc. (NASDAQ:YHOO) has climbed steadily, from $14.65 per share to more than $24 per share.
It seems that the company is on the right track of restructuring under the leadership of CEO, Marissa Mayer. Many investors have confidence in the potential growth of Yahoo! Inc. (NASDAQ:YHOO) search in the near future, as Marissa Mayer was previously the designer of Google Inc (NASDAQ:GOOG)’s user interface.
First quarter earnings results
Recently, Yahoo! Inc. (NASDAQ:YHOO) reported mixed first quarter earnings results. Revenue experienced a year-over-year decline of 7% to $1.14 billion. However, operating income rose by nearly 10% to $186 million, compared to only $169.4 million in the first quarter last year. The improvement in operating income was due to a significant drop in traffic acquisition costs, sales and marketing expenses, product development expenses, and restructuring reversals. In this quarter, Yahoo! Inc. (NASDAQ:YHOO)’s GAAP search revenue came in at $425 million, a 10% drop, compared to $470 million in the same period last year. Excluding traffic acquisition cost, its search revenue actually rose 6% to $409 million.
Google is still dominating in search
However, Yahoo! Inc. (NASDAQ:YHOO) search hasn’t been a significant threat to global search leader, Google Inc (NASDAQ:GOOG). According to comScore, Yahoo! ranked third, with only 11.8% of the global search market share, behind Microsoft Corporation (NASDAQ:MSFT) and Google in March 2013. Google is still the dominant player in this industry, accounting for a whopping 67.1% of the total market. Interestingly, compared to February 2013, both Microsoft Corporation (NASDAQ:MSFT)’s and Yahoo!’s market share has increased by 0.2%, while Google’s market share reduced by 0.4%. Google is famous for its search. However, it is not only a search company, but also a company with a lot of innovations. Its fresh new project is Google Glass, the wearable computer, which could capture five megapixel images and let users interact with the internet with voice commands. Google has set an initial price tag of $1,500, but this price was set for developers for an early test only.
Indeed, Google is set for a lot of potential innovation in the future. Shares are selling for around $801, with a total market cap of $264.8 billion. The market values Google at 15 times its forward earnings and 3.5 times its book value. Its PEG ratio is quite reasonable at 1.17.