Yahoo! Fans Don Rally Caps

As big Internet companies line up to report first-quarter earnings, some investors are betting on a long-awaited jump in Yahoo!'s (YHOO Quote) stock.

The Sunnyvale, Calif., Internet media titan was widely overlooked last year as Wall Street swooned over rival Google (GOOG Quote). Yahoo! shares eked out just a 4% gain for 2005 while Google doubled, giving Yahoo! fans hope that 2006 would bring a lucrative catch-up rally.

But so far, this year has been even rougher for Yahoo! shareholders. While Google's once-sizzling stock has struggled to a flat start to 2006, Yahoo! has plunged 20% in the wake of a mixed fourth-quarter earnings performance and growing online competition.

Now, though, Yahoo!'s plunge is causing some investors to give it a second look. Yahoo!, which is due to report first-quarter results after the market closes Tuesday, is attracting attention because the stock seems cheap while its growth prospects, though still paling next to Google's, appear strong. First-quarter sales, excluding the costs Yahoo! shares with partners, should rise 32% from a year earlier, according to Thomson Financial. Analysts expect an 11-cent-a-share profit on net revenue of $1.08 billion.

Yahoo! is the first of the large-cap Internet companies due to report results. eBay (EBAY Quote) is set to report after the market closes Wednesday and Google Thursday.  

Five Wall Street analysts have upgraded Yahoo! shares since January. Analysts have a median price target on Yahoo! of $42.65, more than $10 above its recent price. The stock also appears reasonably priced, at least compared to Google. Yahoo! at recent levels boasts an enterprise value-to-EBITDA multiple of 26.3, compared with Google's 44.1.

Yahoo! is benefiting from the same trends helping Google, such as the shift of advertising dollars online from traditional media. Web ads are growing in popularity because they allow companies to easily measure their effectiveness. More local advertising is moving online, a trend that also helps Yahoo!.

To view Street Insight's video preview of Yahoo!, please click here.

< Previous

1 2 3

Next >