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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerYahoo! Inc. (NASDAQ: YHOO) will report third quarter earnings on Tuesday October 17 at 5:00 p.m. ET. Here are a few things to watch for:
- One issue Yahoo! will have to address tomorrow is the deals it may or may not see in the future, including some questions about Facebook and YouTube.
- Advertising revenue. Following Yahoo!'s warning that it is experiencing softness in revenues from advertising, especially in financial services and autos, analysts will want to know what is the current situation and what does Yahoo! see going forward.
- Speaking of going forward, many are concerned that Yahoo! might lower targets for Q4 and FY 2006. If this happens, I doubt it is already priced in and we can see Yahoo! shares having another very negative day on Wednesday. Of course, analysts will ask for the reasons.
- Finally, Project Panama, Yahoo!'s new search advertising platform. Yahoo! will be in the spot light on that issue and rest assured that another delay will not go well with investors. Yahoo! will have to announce a firm date for Panama.
I know that both my colleagues Douglas McIntyre and Brian White don't think Yahoo! stands a chance against Google Inc. (NASDAQ: GOOG), even with Panama in place, citing lessons from Google's difficulties in breaking into the online payment system against market leader eBay's PayPal.
While I may not even agree with Doug fully on that point (regarding Google Checkout, which I'll leave that for another post perhaps), I also think the situation isn't comparable. Yahoo! already has a large market share in search and is the #1 web destination, while Google started from scratch in the online payment business. Granted, Yahoo!'s share in Internet search isn't as large as Google's, but Yahoo! is well positioned to gain market share if it delivers a better product as its verticals -- unlike Google -- also have high market shares.
As for consumers' habits being set, I can only say from experience that I already switched to a few services I found to be superior, so I see no reason why I wouldn't change back to Yahoo! Search if it was comparable or better than Google's.
While I may not even agree with Doug fully on that point (regarding Google Checkout, which I'll leave that for another post perhaps), I also think the situation isn't comparable. Yahoo! already has a large market share in search and is the #1 web destination, while Google started from scratch in the online payment business. Granted, Yahoo!'s share in Internet search isn't as large as Google's, but Yahoo! is well positioned to gain market share if it delivers a better product as its verticals -- unlike Google -- also have high market shares.
As for consumers' habits being set, I can only say from experience that I already switched to a few services I found to be superior, so I see no reason why I wouldn't change back to Yahoo! Search if it was comparable or better than Google's.
Estimates: Yahoo is expected to report earnings of 11 cents a share, including the effect of stock compensation. That's a decrease from 14 cents on the same basis a year ago (or 16 cents not including option costs). Thomson First Call analysts expect Yahoo to report third-quarter revenue of $1.15 billion, up 23% from a year earlier.
This is what I see happening:
- Yahoo! meets its new low target numbers or exceeds them with all the above points mentioned dealt with to investors satisfaction - Yahoo! ticks up.
- Yahoo! doesn't meet its new numbers but everything else is shaping up - investors are unimpressed.
- Yahoo! busts in numbers accompanied with delaying Panama or lowering targets - Yahoo! drops, not a 'tick' drop, but a dive.
Either way, most bad news is already priced in but not all. Investors are demanding to see results and some good news. What do you think? Did I miss anything?
(Link to Webcast).
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Reader Comments (Page 1 of 1)
11-01-2006 @ 11:46PM
Karel, in "Inside Facebook" said...
Regarding a possible Facebook deal, I think it is possible though far from complete. The FB leadership would like the autonomy that other acquired companies, like flickr, have enjoyed, and it could probably even stay "a Mark Zuckerberg production". I've read reports that Yahoo is balking at $1B+ valuations, but in my book Inside Facebook (FBbook.com) I argue that with the many untapped ways facebook can monitize and the inherent deep value of it's data, $1B is a bargain.