Yahoo Stock
Yahoo stock background:
The yahoo stock, trading under the symbol YHOO on the Nasdaq Stock Market, closed Fridays (08/11/02006) regular trading session at $27.50, adding $0.01 or 0.04%. In the extended hours of the trade, the stock further gained $0.04 or 0.15% to end at $27.54. The shares have gained 1.56% in the last week. For the month-so-far the shares added 2.08%.
Yahoo Inc. (YHOO), the most trafficked website, provides Internet services to users and businesses. The internet giant was founded in 1994 by David Filo and Jerry Yang, and is headquartered in Sunnyvale, California. When started in 1994, the company stock started trading at $1.38. The company currently has a market capitalization of 37.98 billion with an average trading volume of 22.55 million shares on August 11, 2006.
Terry Semel serves as the Chairman and chief executive officer of the company. Susan Decker plays the role of the chief financial officer and executive vice president of finance and administration. Daniel Rosensweig is the chief operating officer of the company.
Plunge in Yahoo price in July 2006
On July 19, 2006, the stock had declined about 22% to $25.20, erasing about $10.4 billion in shareholder wealth. Unanimously, the drop was attributed to the delayed launch of the companys new ad system, Panama. The release was postponed to the fourth quarter, compared to the previously promised third-quarter launch.
"I can sense the frustration of investors," said Piper Jaffray analyst Safa Rashtchy. "It's discouraging and disheartening, especially because Yahoo didn't really give a good reason for the delay." However, Rashtchy maintained his "outperform" rating on Yahoo's stock, although he lowered his 12-month target for the shares from $42 to $36.
On the same date, Deutsche Bank downgraded Yahoo shares to Hold from Buy with a price target of $30. The brokerage noted that that it estimates the stock to be range bound in upper $20 - $30 through 2006 second half. Further, the brokerage noted that the though the fundamental growth story looks respectable, the stock catalyst of the search monetization launch that has been pushed out to early 2007, is limiting an upside.
JP Morgan Securities analyst downgraded Yahoo's stock to "neutral" and expressed doubts whether the company will even be able up to live up to its financial projections for the rest of the year. The analyst also suggested that Yahoo is destined to fall further behind in its technology race with Google.
Furthermore, on July 18, 2006, after the bell, the company reported its second-quarter financial results, and posted an adjusted profit of $237 million compared to $209 million in the year-ago quarter. On a per share basis, the earnings for the quarter were $0.16, up from $0.14 in the same quarter last year. Revenues for the three-month period rose 26% to $1.57 billion from $1.25 billion in the earlier year quarter. Analysts had expected the company to report $0.11 per share on revenues of $1.14 billion.
However, a positive second-quarter results could not trigger enough optimism among the companys investors, and thus failed to offset the negative impact of the delay in Panam release. On Wednesday, July 19, 2006, yahoo gapped open drastically down in the morning and dipped further just before noon. The stock took out the lows of the day around mid-afternoon and closed down by 7.04 at $25.20 on the highest volume of the year. Yahoo! sank below support to close at a 52-week low.
The decline in the share price on July 19 was more a reaction to the delay in the launch and not a move directed for the second quarter results. The shares had also plunged the day next to the fourth quarter 2005 results, losing 12% to close at $35.18 on January 17, 2006. The income for the quarter had jumped 845 to $683 million or $0.46 per share, compared to $372 million or $0.25 per share in the 2004 fourth quarter, but missed estimates target by a penny. The shares plunged on the news that the results were down a penny from the consensus Wall Street estimates.
Yahoo in the irrational stock market January 06
A one-penny miss turned into a 13% collapse in the stock market for Yahoo in mid-January 2006. It is a very common opinion among investors that prices are determined by the fundamentals of the company sales, profit margins, market share, etc. This is not wrong, but is more applicable in the long run. In the short run, however, the shares are more sensitive to the news in the headline and the general market trend. Moreover, company fundamentals are historical, while the stock quotes are determined by the future, and not the past.
Till January 2006, Yahoo stocks were also moving up. But the decline was a result of the investor sentiment that the company may not maintain its growth pace.
Yahoo shares have always been sensitive to its financial results, indicating the keenness of its investors along with the great load of confidence over the company performance. In April 2002, the shares of the company witnessed a 16% plunge to $7.72, compared to $9.22 on the previous day, owing to its first quarter 2002 results.
Analyst sees Yahoo as 2007-2008 stock
Caris & company analyst expressed his opinion after the yahoo stock slide in mid July.
Until/unless the company is able to demonstrate tangible success vis--vis its search algorithm fix (i.e. grow its market share) it will be hard to make the case for re-acceleration in Marketing Services revenue growth, which in our view is the key driver of the stock. On the conference call last night, CEO Terry Semel revealed that Yahoos schedule for rolling out the front end of its new advertising platform has now been pushed back an entire quarter to fourth quarter of 2006. In our view, this announcement is a key incremental negative for the stock because it pushes any likely financial impact of Project Panama all the way out to second half of 2007. We believe that the announcement of this delay was the primary driver of the 14% after-market drop in YHOO shares.
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