Alacra Pulse Prognosis: Yahoo! Price Targets
Several analysts have lowered their 12-month price target for Yahoo! (YHOO) following the company’s lackluster quarterly report. Most analyst targets are clustered in a narrow range between $18 and $21 with an Alacra Pulse Median of $19 based on the 13 most recently updated targets.
Although earnings were up, revenue slipped and analysts are worried that things might get more challenging for the search engine as it competes with the likes of Google (GOOG), Facebook and China’s Baidu (BIDU).
Citigroup’s Mark Mahaney downgraded shares of Yahoo to “Hold” from “Buy” and lowered his price target on the stock to $18 from $22 last week. ”We are concerned with YHOO’s overall Internet Usage Share Loss – now less than 10% of U.S. ‘Net usage minutes,” he wrote.
Search-related revenue at sites owned and operated by Yahoo declined 8 percent from 2009’s second quarter, while Google’s core paid search advertising revenue increased 24 percent in the same period, said Martin Pyykkonen of Janco Partners.
“Yahoo is clearly continuing to lose market share in paid search ad monetization and revenue growth vs. Google,” said Pyykkonen, who lowered his price target on Yahoo to $15 from $16 last week.
Oppenheimer & Co. analyst Jason Helfstein who has trimmed his price target on the company to $18 from $19, said Yahoo isn’t doing enough to cut costs. Heath Terry of FBR Capital Markets agrees and said, ”What they need are people staying up late, spending time on Yahoo…From all the numbers that we see, that’s just not happening.” Terry also cut Yahoo’s price target to $15 from $18.
James Mitchell of Goldman Sachs repeats his “Neutral” rating, but lowered his target to $18, from $21. “Yahoo! may prove the canary in the media coal mine who first signals a slowdown,” he says. “We view this outcome as unlikely given other media companies who have reported (Omnicom, Gannett) cited no slowdown, and given Yahoo stated advertising trends picked up in July.
But Barclays Capital analyst Douglas Anmuth said they are sticking with their positive view on Yahoo as the stock’s reward/risk remains attractive. However, Anmuth, who maintains an “Overweight” rating, cut the stock’s price target to $21 from $23 and said share prices and numbers need to be adjusted down for the short term.
Analysts at William Blair and Co. said they “are concerned that growth has stalled at Yahoo,” noting that the site’s number of page views have been decelerating, and now declining, since the second quarter of 2008. JPMorgan’s Imran Khan also cut Yahoo’s price target to $21 from $24 after the company’s quarterly earnings release.
Analysts don’t expect Yahoo! Japan’s decision to use Google for search to have an immediate impact, but it could lead to Yahoo! eventually dumping its 35% stake in the company. “An unanswered question is could you do some kind of tax-free spinoff to shareholders,” said Oppenheimer’s Helfstein.
The Alacra Pulse Median analyst price target for Yahoo! is $19, down from $21 a month ago but still 38% above the July 29 closing price of $13.76.
The most recent price targets by analysts featured on Alacra Pulse are shown below. Click image to enlarge.
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