Today should be simple for Yahoo! Inc. (NASDAQ: YHOO) with its earnings report slated after the closing bell. It is going to be hard to expect much out of for its earnings report. With news still fresh that Jerry Yang is gone permanently and with a new CEO, is there any reason at all to expect that the earnings report will be a good report? Google Inc. (NASDAQ: GOOG) even managed to boink its earnings report due to lower costs per click. If Yahoo! is a very distant competitor on online static ad displays, how could it possibly not have faced some of the same issues as Google?
Today is about Yahoo!’s future… Not just about a buyout, but about how to monetize the Alibaba asset in China and the Yahoo! Japan asset in Japan (of course). The $19.5 billion market cap includes some of the following: cash and short-term investments of over $2.1 billion with only $134 million in long-term debt. The total equity value is $12.46 billion and the net tangible assets after the goodwill and other intangible assets is still about $8.5 billion.
Revenues have been heading the wrong way even if last quarter’s $1.21 billion in sales generated net income for holders of $293 million. The big fear is that Yahoo! won’t be able to grow earnings and it is suddenly not cheap. With estimates for all of 2011 at $0.82 EPS, Yahoo! trades at a multiple value at 19-times earnings. Teh consensus estimate of $0.89 EPS from operations generates a forward earnings multiple of 17-6-times.
You can sit around and evaluate the past quarter all you want. One thing that Carol Bartz did successfully, while driving out many prominent employees, was to get the company’s operating costs down to better levels. Our take is that Yahoo!’s Scott Thompson has his hands free to do and say what he wants.
If he can demonstrate that he will be mindful of costs while bringing some lost talent back or getting new talent while simultaneously driving home the value of the oversees assets then the reception may be warm.
Our take is that options traders are not expecting a move of more than about 5% in either direction.
Yahoo!’s chart is critical right now. With shares at $15.67, the 50-day moving average is 15.64 and the 200-day moving average is $15.24.
JON C. OGG
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