Not much more information came out after my frantic post around noon today about Yahoo!'s share price drop, but things became clearer. The earlier post mentioned that Yahoo! lowered its forecast for Q3, and it now now appears that the weak growth in auto and and financial advertising responsible for the lower forecast, will also have an impact on other financial measures, such as cash flow.
Yahoo is now likely to report results in the lower half of the range it had forecast in July for Q3 revenue. The Q3 forecast was $1.11 billion to $1.22 billion, meaning that for Yahoo! to "come in at the bottom half" now implies that Yahoo! revenue will be in the range of $1.11 billion to $1.165 billion, when analysts' consensus forecast was $1.18 billion. Do you see the problem?
She couldn't tell whether the softness is a one-off, whether it is related to the slowing economic growth or whether it is part of a broader trend.
Not surprising, my colleagues here at BloggingStocks took several approaches as well. One, by Sarah Gilbert, blamed it all on Yahoo! She could be right, as some analysts think the weakness is Yahoo!-specific, a slowing demand for display or branded advertising that shouldn't affect other companies such as Google that don't have the same ads.
Tom Taulli, on the other hand, thought this could be part of a larger trend that could affect Google Inc. (NASDAQ:GOOG). This is supported by IAC Media also experiencing a slowdown in financial advertising. Several analysts also seem to think this could be the result of macroeconomic forces and slowdown in the auto and housing industries. This would mean other companies (such as Google or eBay) could be affected.
Yahoo! Inc. (NASDAQ:YHOO) shares dropped $3.25, losing 11.21% of their value to close at $25.75.
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Reader Comments (Page 1 of 1)
9-19-2006 @ 9:47PM
Ken said...
People are much much to quick to sell on blah blah news that impact short term results. By short term I am talking to current quarter results. Watch for Yahoo! to jump near the end of the year and Q1 '07. Yahoo! is set to roll out their new (belated) advertising scheme which is promised to produce individual consumer targeted ads which in turn should provide an increase in revenue as ad firms warm up to the new software.
PS...I have absolutely no affiliation with Yahoo! and I currently do not own Yahoo! But I do plan to buy at current levels.
9-19-2006 @ 9:47PM
Helen said...
I've always worked on the pinciple that advertisers are the first to experience market trends (positive or negative).
Those high gas prices have got to suck a lot of discretionary spending out of the economy I guess.
Gulp!
9-20-2006 @ 4:34AM
jb said...
At this price, yahoo is a bargin. I think lots of people are forgetting that Yahoo is still number one in a lot of services. For example, email users, message boards and Yahoo finances are by far the biggest in the business.
The question is will Google continue to eat Yahoo's lunch? My answer is no. There is enough rooms for both companies to growth=.
Yahoo is also improving their service. They just launched great email service. It is using the same technology (Ajax) that Gmail is using. They also started their new stock chart which is a big improvment. They are also getting ready to launch their new ad system.
Also, remember that MSFT may also looking at buying Yahoo. MSFT needs Yahoo to compete head to head against Google. MSN by itslef will not cut it.
9-20-2006 @ 10:04AM
Sheldon said...
All this is worthless. You can sell dollars for 99 cents all day long, have tons of business, but not be in business...for long. Yahoo will not be a stand alone business forever. It is a modern TV network with lots of valuable content accept unlike the original big three the moat around it is not very deep. How much money do they make from services vs advertising? It's TV with a shallow moat. MSN should not buy it. Comcast of Verizon should buy it. They have cash flow, MSN does not, and they are networks. BTW JB,"email users, message boards and Yahoo finances are by far the biggest in the business" except they are free!
9-20-2006 @ 6:56AM
jb said...
Yes, they are free but the fact is page viewing has direct relation to clicks which also has direct impact to revenue.
google make most of their money by charging how many times an ad is viewed or clicked. All other products they have (Google map,gmail,google talk and etc) are just brand builders and have no implact on the bottom line.
just goto Yahoo finance page and count the ads. Each ads are is a potential click (revenue). If Yahoo can continue to improve their free service, it will eventually pay off.