Yahoo! Inc. (YHOO) is Finally on the Right Track, But the Stock is Near Fair Value

Page 1 of 2

Yahoo! Inc. (NASDAQ:YHOO)’s fourth-quarter results have given investors a real reason to believe that Marissa Mayer is moving the company in a positive direction. Yahoo! reported Q4 EPS of $0.32, better than the analyst estimates of $0.28. Revenue, excluding traffic acquisition costs, was $1.22 billion, compared with $1.17 billion in the year-ago quarter. That’s a sequential increase from its third-quarter 2012 revenue of $1.2 billion — a higher EPS of $0.35 in 3Q was due to one time gain from the Alibaba sale.

Yahoo! (YHOO)Yahoo! signed several key partnerships during the fourth quarter, including with CBS and NBC Sports, and made several improvements in Yahoo! Mail and Flickr for a better mobile experience. I believe Yahoo! has now initiated its long-awaited return towards recapturing its former status as the king of the web portal.

Marrisa Mayer’s role

Since taking over the helm at Yahoo! Inc. (NASDAQ:YHOO), Marissa Mayer has been active in putting Yahoo! on the right path. She persuaded co-founder of Paypal — Max Levchin — to join the company, as well as hiring famous recruiter Sandy Gould. She also stepped up on M&A through acquisitions of Stamped, Snip.it, and videochat startup OnTheAir. By hiring better employees and acquiring promising new companies, Yahoo! is re-focusing on its talent-building strategy, which will lead to a better quality of people joining Yahoo! in the future.

Mayer, through her former experience at Google Inc (NASDAQ:GOOG), is also aware that Yahoo!’s success in the future lies in implementing incremental improvements in existing users’ experience — through personalization of search, video and mobile. Mobile growth still remains a weak spot for Yahoo!, where it needs to make better quality products in order to sell more ad space to advertisers. Due to the shift from the desktop to mobile, it’s a no-brainer that this is an area where Yahoo! needs to be investing in the near future.

Mobile is the future

Yahoo! already has an advantage in mobile because of its large existing users base — the company already knows users’ habits through products and applications available on its web portal such as finance, news, weather, email, sports, etc. Yahoo! can now capitalize on this and provide mobile contents with users’ daily habits and potentially add more personalization around those habits in the future.

The mobile transition is now a global phenomenon, with smartphone adoption increasing worldwide. This move has shifted consumer behavior, with many people now using their smartphones to listen to music, watch tv, do online shopping, and consume other media. But Yahoo! will have to face immense competition in the mobile space, especially from Facebook Inc (NASDAQ:FB) and Google.

Mobile Competition

Reports suggest that Facebook’s revenue from its mobile platform will exceed those of any other platform next year. Facebook is now expected to reach a market share of almost 20% of the mobile advertising market in the US next year. Its mobile games and apps are showing no signs of slowing down, with popular games experiencing new record monthly active users. Together with its newly acquired Instagram, Facebook is sure to give Yahoo! a tough time as the latter tries to expand into mobile.

Yahoo! actually is in double jeopardy; not only it has to gain mobile market share but also defend its current desktop portal dominance. This compared to Google, whose mobile penetration has shown no signs of slowing down. Google ended 2012 with a mobile market share of 17%. But through its excellent service to advertisers on AdMob network and future expansion of YouTube mobile monetization, Google is all set to further extend its mobile advertising presence.

Revenue diversification

Moreover, while increasing usage Yahoo! needs to put more focus on growing international presence and appealing to a broader demographic of users. At present, Yahoo! derives 75% of its total revenue from the Americas region, something that needs to be worked on in the future. Organic user growth in the emerging markets, as more new members of the middle class start accessing the Internet, has the potential to deliver much needed revenue-diversification for Yahoo! in the future.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!