Yahoo (YHOO) Surges to a 5-year High

Yahoo (YHOO) CEO Marissa Mayer, who has led the Sunnyvale, Calif.-based company for a year now, certainly has a knack for making headlines. Over the past year, her shopping spree which culminated in the purchase of Tumblr for $1.1 billion has captured the attention of the media and investors. Mayer has also never been one to shy away from the camera, and Yahoo's second quarter earnings last week showed her willingness to address investors directly.

Mayer and CFO Ken Goldman didn't simply do a typical earnings call - they did a full newscast-style video and played the roles of TV news anchors releasing their quarterly results. Daily Chart
Perhaps Mayer's strategy worked, since shares of Yahoo surged to a five-year high after the earnings report, which was decent but far from spectacular. For its second quarter, Yahoo earned $0.35 per share, up from the prior year's earnings of $0.27 per share and topping the consensus estimate of $0.30. Revenue, however, declined 7% year-on-year to $1.07 billion, missing the $1.08 billion that analysts had expected. The culprit behind that top line miss was an 11% decline in display advertising revenue from the prior year. Although Yahoo sold roughly the same amount of ads, its price per ad plunged 12%, similar to Google's (GOOG) 6% slide. Yahoo's total display revenue came in at $423 million, accounting for 39.5% of its top line. Paid clicks rose 21%, but its price per click, just like its price per ad, fell 8%. Yahoo's search revenue rose 5% to $418 million. Yahoo is still notably tied to Microsoft (MSFT) in a search agreement inked by Mayer's predecessor Carol Bartz, in which Yahoo's search results are powered by Bing in exchange for a cut of its search revenue. It's a fairly one-sided deal that Mayer has been attempting to break, in favor of teaming up with her old employer, Google, instead. Yahoo's revenue was also boosted by its stake in Alibaba - China's largest e-commerce site that is larger than Amazon (AMZN) and eBay (EBAY) combined. Alibaba's two main sites - Taobao and Tmall - are the two largest sites in consumer-to-consumer (C2C) and business-to-consumer (B2C) transactions in China. Taobao holds a 95% market share in C2C while Tmall has a 41% share of the B2C market. That dominance helped Alibaba more than triple its earnings to $669 million last quarter as its revenue surged 71% to $1.4 billion. Yahoo currently owns a 24% stake in Alibaba, as a result of co-founder and former CEO Jerry Yang's initial investment. Looking forward, Yahoo will have to see if its investment in Tumblr as its social answer to Facebook (FB), Twitter and Google+ can pay off. If so, then the popular blogging network, which has 108.2 million users, could become the company's killer app for boosting revenue again. In addition, many of the 16 startups Mayer acquired are aimed at building an ecosystem that Yahoo sorely lacks when compared to Google. If Mayer can add video, social media, and possibly cloud-based apps to Yahoo's portfolio, the company might actually have a fighting chance of claiming back a share of the industry that it helped create. Other News About YHOO Here's Why Yahoo's Marissa Mayer Wants to Break Up with Microsoft Can Yahoo escape its search partnership with Microsoft? Yahoo Nears Microsoft's 2008 Buyout Bid Price Yahoo shareholders who have held on for five years might finally be rewarded. Other Stocks in the News Will Apple Really Force Verizon to Cough Up $14 Billion? Will Verizon be on the hook for unsold iPhones? Why Did These 3 Healthcare Stocks Rally? Why did these three stocks soar? Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Jul 25, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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