NEW YORK (CNN/Money) -
Like Britney Spears, who has declared herself "not a girl but not yet a woman," Yahoo! is in an awkward in-between stage -- not a dot.com but not yet a full-fledged media company.
Indeed, the company's quarterly results, announced after the close of trading Wednesday, were reasonably solid, reinforcing Yahoo's position as one of the few Internet survivors. Net profit was $21.4 million or 3 cents per share on revenues of $225.8 million. That was a penny ahead of expectations.
And for the full year, management sees revenues between $900 and $940 million, a bit higher than most analysts were expecting. The results gave the stock a boost in after hours trading, enabling it to recover the ground it lost in regular trading. (see more on Yahoo's numbers)
Yet despite its best efforts, Yahoo isn't there yet. Read the company's press release and listen to its conference call, and you can see management is trying really hard to convince us otherwise.
| |
MORE TECH INVESTOR
| |
| | |
| | |
|
In a statement accompanying the earnings release, Yahoo chief financial officer Susan Decker said the company was working hard on its "continued evolution to a more robust and sustainable business model." On the conference call, CEO Terry Semel said the company was "methodically and aggressively" moving away from dot.com advertisers to more traditional companies. He told investors the company had "turned the corner," and had signed up more than a million paying customers.
So what's the problem here?
While the company is starting to make progress in its efforts to transform its many visitors into paying customers (that is, to "monetize" them), it's only in the beginning stages and it's far from clear that the company will be able to significantly expand its paid services without alienating users who've come to expect Yahoo to be free.
In addition, the online ad market may be stabilizing, as Decker assured investors on the conference call, but a robust recovery doesn't seem to be in the cards any time soon.
Given all that, Yahoo's valuation, like its remaining dot.com advertisers, still seems to be something of a hangover from the bubble years. While still in the midst of a messy transition, the stock is valued like a company at the top of its game, trading for more than a hundred times estimated 2002 earnings and more than 60 times 2003 earnings.
Worries about the stock's valuation -- and continued weakness in the online ad market -- have weighed heavily on the stock in recent months, which has fallen some 40 percent from its 52-week high.
Analysts are mostly lukewarm on the stock. Investec initiated coverage of the stock with an actual "sell" rating on Wednesday, and 10 of the remaining 22 analysts who cover the stock rate it an unenthusiastic hold.
Still, the stock has its fans. US Bancorp Piper Jaffray's Safa Rashtchy suggests in a recent research note that the stock deserves to trade for more than 100 times his 2003 estimates, suggesting that's a reasonable "stability premium" that reflects Yahoo's "steady growth" and the "slow but undisputed recovery" in the online ad market.
Meanwhile, Morgan Stanley's Mary Meeker -- try saying that 10 times fast -- has continued to enthuse about Yahoo's vast audience of "under-monetized" users, ever hopeful the company will be able to transform these eyeballs into cold hard cash.
Gramma, why are your unmonetized eyeballs so big?
The better to monetize them later, my dear.
Sign up to receive the Tech Investor column by e-mail.
Plus, see more tech commentary and get the latest tech news.
|
