Yahoo announced its ninth record quarter yesterday and promptly got smacked by the Street; the stock is down 11.29 percent to $33.47 as I type because analysts had higher expectations for 2Q05 earnings. Thompson First Call expected $882 million and Yahoo gave guidance for $880-930 million $855-895 million but turned in $875 million. That doesn’t mean analysts are sour on the company. Q205 Here’s what some of them have to say:
Mark Stahlman, Caris & Co. (IBD):”Their )Google, Yahoo, etc.) future will be in their ability to diversify into other revenue streams. Yahoo is ahead of Google in that regard.”
David Edwards, American Technology Research (AP/CBS): “With a stock like this, you have to beat and raise (expectations) to keep things running. There continues to be expectations that this company is going to outperform and outperform. But you have to take a step back and wonder how much longer it can keeping growing at these rates.”
Safa Rashtchy, Piper Jaffray (TheStreet.com): “Much like the second quarter last year, Yahoo! produced solid growth, yet short of the broader market expectations for beating estimates and guidance.” The seasonal slowdown, he added, serves “as a reminder to be more moderate in our growth expectations.”
– Lauren Fine, Merrill Lynch: “We continue
to be impressed with Yahoo’s absolute growth notwithstanding heightened expectations. We like the diversified revenue stream, the strong margins, excellent free cash flow characteristics and believe the growth is likely to continue given all that Yahoo has on its platter. Weak after market trading could create a buying opportunity, although we recognize that there is risk ahead of Google’s earnings as well.”
Benjamin Schachter, UBS: The most critical — and detailed — note I’ve seen so far. “Prior to the call, we noted an almost palpable sense of frustration among YHOO investors we spoke to. In our view, neither these results, nor the earnings call will alter that sentiment. We think YHOO needs to show movement on key initiatives, including: search monetization efforts, YPN, Yahoo Hollywood (Lloyd Braun’s group), and int’l growth.”
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