Even after falling 13% in evening trading, not to mention plunging 90% from its 52-week high, Yahoo! (YHOO:Nasdaq - news - boards) is still one of the most expensive big-cap stocks around.

What's more, the Web portal company, which Wednesday cut revenue projections and forecast no earnings for the first quarter, won't start looking attractive until it trades south of $5, back-of-the-envelope calculations show.

Santa Clara, Calif.-based Yahoo! gave no guidance for all of 2001, only for the first quarter. It said it expects pro forma earnings (i.e., profits with certain noncash expenses and special charges added back in) to be "approximately break-even."

Vertigo? One man's 2001 earnings outlook for Yahoo!
Period	Revenue Projection*	Estimated Pro Forma Earnings**
		30%	26%	15%
Q1	$180	--	--	--
Q2	189.0	$56.7	$49.1	$28.4
Q3	198.5	59.5	51.6	29.8
Q4	208.4	62.5	54.2	31.3
Total	775.8	178.8	154.9	89.4
EPS		0.29	0.25	0.15
P/E @ $20.50		70	81	140
P/E @ $17.88		61	71	122
P/E @ $5		17	20	34
*Assuming 5% sequential growth. **Using various margin assumptions, outlined above. Source: Detox

Although it had already slashed first-quarter expectations in January, Yahoo! did so again Wednesday because the decline in ad spending by the company's clients has deepened. Yahoo! also said Tim Koogle plans to resign from the chief executive position once a replacement is found. The departure, at such a critical point in Yahoo!'s fortunes, implies instability in the company's leadership. It may also herald a sharp change in strategy. On a conference call Wednesday, the company's executives referred to, but didn't describe, initiatives designed to "monetize" Yahoo!'s Web traffic.

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Skittish Analysts Slash Yahoo!

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Commentary

Cramer: Assessing Yahoo!'s Options

Seymour: Yahoo!'s Koogle Bumping Himself Upstairs

Williams: How Long Can Yahoo! Hang On to a Room of Its Own?

The fact is, Yahoo! could easily end up making less than 10 cents a share for all of 2001, well below the current 36-cent estimates quoted by First Call/Thomson Financial. A 10-cent profit would give a price-to-earnings ratio of 180 at the $18 price tag that Yahoo! was trading at in after-hours markets Wednesday.

Yahoo! declined to comment on forecasts in this piece, saying it won't talk about full-year 2001 earnings until its first-quarter earnings come out next month.

How do we get below 10 cents? Let's start by charitably assuming that revenue will grow by 5% a quarter in 2001 from the company's upper forecast of $180 million. That'd project full-year revenue of $775 million. What margin to apply to that? Yahoo!'s 2000 pro forma net income margin was 26%, but that has probably shrunk significantly, or else Yahoo! wouldn't be expecting zero profits in the first quarter. If the margin ends up being 15% for the whole year, the company could make around $90 million. Divide that by the current number of shares and you get 15 cents. Now that's the kind version.

Of course, Yahoo!'s revenue could decline by 5% each quarter in 2001. That could mean earnings of 12 cents a share with a 15% margin. With a 10% margin, we're talking 2001 earnings per share of only 8 cents.

Of course, net income margins may stay the same as in 2000, at 26%, or increase amid efficiency measures, to something like 30%. In the latter case, Yahoo! could end up making something on the order of 29 cents a share.