Yahoo Profit Up More Than Expected
Internet pioneer Yahoo Inc. said Tuesday that second-quarter earnings rose more than analysts had expected, boosting its battered shares in after-hours trading.
But the leading Internet directory firm didn’t dispute accounts of an overall slowdown in Net advertising growth, caused in part by “dot-com” companies cutting back on spending or even closing their doors.
That left Wall Street doubtful that the sentiment would spread to other Internet stocks that have been hammered lately, such as the leading Web advertising firm DoubleClick, which fell $3.19 Tuesday to a 52-week low of $28.50.
“I’ll be pounding the table tomorrow morning, saying you should own [Yahoo] given its ability to ride through industry perturbations,” said analyst Scott Reamer of SG Cowen Securities in New York. “But it wouldn’t cause me to go out and buy a list of other stocks.’
DoubleClick fell after Merrill Lynch analyst Henry Blodget reduced his second-half and 2001 revenue estimates, noting that the company’s management had called the consensus projections “challenging.”
“We think another shoe or two may potentially drop over the summer (in the form of continued softness in dot-com advertising, or additional downward estimate revisions, for instance),” Blodget wrote to clients.
Yahoo acknowledged that there were continuing problems with the financial health of some Internet companies and with advertising rates.
But executives at the Santa Clara, Calif.-based company said consolidation was leading traditional companies to favor it and other leaders on the World Wide Web.
“As the industry rationalizes to fewer strong companies, we feel very confident,” Chief Financial Officer Sue Decker said on a conference call for investors. “Yahoo will emerge from this period with a dramatically stronger marketplace.”
Yahoo said its earnings before merger-related costs and taxes related to options more than doubled to $74 million, or 12 cents a share, from $27 million, or 5 cents, a year ago. That matched the unpublished “whisper” estimates and beat the average projection of 10 cents offered by analysts surveyed by First Call.
Revenue from ads on Yahoo’s directory and from other services, including corporate intranet design and video transmission, jumped 110% to $270 million from $129 million, handily beating projections even while growth in the number of Yahoo Web pages viewed was slower. That was down from 120% in the first quarter and the 140% year-ago growth rate. Net income rose to $65 million, or 11 cents, from break-even a year ago.
While Yahoo shares fell $4.50 to close at $105.50 in regular Nasdaq trading before the earnings announcement, they rocketed to $121.75 in after-hours.
“People were looking for really negative news, and I don’t think they got that. It sends a positive message,” said analyst Paul Noglows of Chase H&Q.;
Before Tuesday’s profit report, the first of the quarter by a major Internet company, Yahoo shares had fallen by nearly half since March. The stock’s peak was $250.06, reached in January.
Other Net shares have stumbled badly in recent weeks, even as other tech stocks have rallied. Auctioneer EBay fell $4.13 Tuesday to close at $43.94, off from $121.88 in March, and Priceline.com dipped $4.75 to a 52-week low of $32.50.
Online retailing giant Amazon.com fell $1.94 to $33.13, just above its 52-week low of $32.44.
Some analysts said Yahoo’s good showing in after-hours trading could spread to other stocks, mainly for emotional reasons.
“It could provide a near-term boost for a number of other advertising-based companies,” said Derek Brown of WR Hambrecht & Co. in San Francisco.
But other analysts and Yahoo itself said the company’s second-quarter performance indicated more about Yahoo’s differences from the rest of the field.
“Established companies are continuing to turn to the Web, and dollars have always followed eyeballs,” Chief Executive Tim Koogle said.
Yahoo sites were the third most popular on the Web in May, after America Online and Microsoft sites, according to Media Metrix. Yahoo said it averaged 680 million daily page views in June, up from 625 million three months earlier.
Though Yahoo executives were upbeat in talking to investors about the company’s results and expectations, they also ducked a number of questions, including the direction of the prices they are able to charge per thousand visual ad impressions.
And when asked what proportion of their income is from dot-com companies, they declined to break the figure out.
Instead, Yahoo officials said that one-fourth of the company’s revenue is from either business services or from overseas, where the dot-com slide hasn’t been as sharp.
“Our exposure to financially questionable clients is less than 10% of our revenue,” added CFO Decker.
Analysts, who wanted more detail, said they were concerned that the good showing wouldn’t last forever. “I continue to hear negative stories” about online advertising, Brown said. “I would be surprised if Yahoo is able to remain totally immune to that.”
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Shares of Yahoo Have Slumped . . .
Yahoo’s stock fell Tuesday to its lowest level since November, in advance of the company’s quarterly earnings report. Weekly closes and latest in regular Nasdaq trading:
Yahoo (YHOO): $105.50
. . . Along With Other Net Giants
Shares of such well-known Net firms as DoubleClick, EBay and Amazon have been spiraling lower in recent weeks, despite gains in many other tech stocks. Weekly closes and latest:
EBay (EBAY): $43.94
Amazon (AMZN): $33.13
DoubleClick (DCLK): $28.50
Source: Bloomberg News
