Yahoo! Inc. (YHOO), Google Inc (GOOG), Facebook Inc (FB): Which Is the Best Internet Bet?

Facebook Inc (NASDAQ:FB) is currently my top pick in the Internet advertisement industry due to its mobile-monetization strength. Although Google Inc (NASDAQ:GOOG) has the Android OS on its side, the company has still not fully monetized its potential. Yahoo! Inc. (NASDAQ:YHOO) will have to further improve its display segment growth if it wants to avoid revenue erosion by Facebook and Google Inc (NASDAQ:GOOG).

The quarter

Yahoo!’s 1Q 2013 results were the primary reason behind a 4% after-market drop in the company’s share price. The company beat analyst expectations by reporting earnings of $0.35 per share as compared to analyst expectations of $0.24 per share. Earnings were up 36% y/y but the market was focusing more on the revenue decline.

There was a 7% decline in revenue, which was $1 billion for the quarter. According to analysts, much of the net-income rise can be attributed to Alibaba and Yahoo! Japan, which contributed $217.6 million to the bottom-line performance.

Bottom line

The company reported an average quarter but considering the turmoil before Marissa Mayer, this can be counted as a win for Yahoo! investors. Yahoo! is currently trading at a forward p/e of 19 and has significant room for upside.

Considering the high growth expected from the US Internet industry, we can value the company with a p/e of 25, which gives us a target price of $30. Therefore Yahoo! Inc. (NASDAQ:YHOO) has an upside of 30% at current valuations making the stock a strong buy. Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOG) are still the best bet in the Internet advertisement industry but for investors looking for a high-risk, high-return play, Yahoo! is the way to go.

The article Which Is the Best Internet Bet? originally appeared on Fool.com.

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