Yahoo Stock Jumps on Improved Forecasts
Shares of Yahoo Inc. rose to their highest level in nearly 2 1/2 years Monday as analysts raised their earnings estimates in expectation of strong quarterly results in the company’s advertising and search businesses.
Yahoo rose 57 cents, or 1.6%, to $35.27 on Nasdaq. The stock is up 116% year to date.
J.P. Morgan analyst Daryl Smith raised his second-quarter earnings estimate to 9 cents a share on revenue of $317 million, from a previous estimate of 8 cents and revenue of $305 million.
For the year, Smith raised his estimate to 37 cents on revenue of $1.3 billion, from 33 cents and $1.26 billion.
Based on checks of online ad agencies, online media companies, and advertisers, “We believe Yahoo is experiencing a strong quarter in its core advertising business,” Smith said.
The company is due to report results Wednesday.
But Smith maintained a “neutral” rating on the stock, saying it already “reflects strong operating expectations” at a price of 71 times his 2004 per-share estimate.
First Albany Corp. analyst Youssef Squali, who was maintaining a “buy” rating on the stock, said Monday that he expected Yahoo to exceed both his estimates and the consensus estimates as tracked by Thomson First Call for sales and profit.
He also expected an increase in the company’s forecast for its full-year earnings before interest, taxes, depreciation and amortization, or EBITDA, from its current estimated range of $350 million to $380 million. He expected the full-year EBITDA of $409 million.
U.S. Bancorp Piper Jaffray analyst Safa Rashtchy also raised second-quarter estimates and said the company’s search and ad businesses would drive profit for the quarter.
Rashtchy, who has an “outperform” rating on Yahoo, said he raised his revenue forecast to $320.2 million from $306.2 million and earnings estimate by a penny, to 9 cents a share.
Analysts have said the online advertising industry is making a comeback after the slump in the wake of the dot-com bust. More traditional advertisers are gravitating toward the medium as Net players such as Yahoo better understand the needs of those advertisers, experts say.
