Yahoo! Slips on Steady Guidance
George Mannes
01/15/04 - 08:39 AM EST
Updated from Jan. 14
Yahoo! met its match Wednesday in tech
investors' rising expectations, and its shares reflected that in premarket trading Thursday
The big Internet media company sailed past Wall
Street's targets after the bell, posting
fourth-quarter earnings of $75 million, or 11 cents a
share, on net revenue of $511 million. But as some
observers had cautioned, the company's strong
performance wasn't enough to forestall the oft-invoked
sell-the-news instinct, and Yahoo! shares fell $1.65, or $3.41%, to $46.74 in
early trading Thursday.
It wasn't that the numbers were terribly weak. The
Thomson First Call analyst consensus estimate had
called for earnings of 11 cents a share on net revenue
of $495 million. Net revenue excludes the
traffic-acquisition costs, or TAC, that Yahoo! pays online
search partners such as
Microsoft . A
year ago, Yahoo! earned $46 million, or 8 cents a
share, on revenue of $286 million.
Looking ahead, Yahoo! gave guidance straddling
Wall Street's expectations going into the call. In the
first quarter ending March 31, Yahoo! projects
revenue, excluding traffic acquisition costs paid by
its Overture Services subsidiary, of between $475
million and $505 million. Analysts surveyed by Thomson
First Call had been expecting first quarter revenue of
$492 million, net of TAC, and earnings per share of 11 cents.
For full-year 2004, Yahoo! forecasts after-TAC revenue in
the range of $2.12 billion to $2.25 billion. Analysts
had been expecting 2004 revenue of $2.17 billion.
"Yahoo!'s fourth-quarter performance completes a
year of phenomenal growth for our company, and
represents the most successful quarter in the history
of Yahoo!," CEO Terry Semel said in a statement. "Great products
equal great business," Semel added on a postclose
conference call.
Still, considering the massive appreciation in the
already red-hot Internet sector -- where shares of
Yahoo! and its blue-chip online peers
eBay
,
Amazon.com and
InterActiveCorp have been marching
steadily higher for the better part of a year -- the
postclose selloff hardly came as a shock. Indeed, some
analysts suspected Yahoo! shares could slip following
the report if it failed to boost its first-quarter
guidance well beyond the consensus.
Each of Yahoo's different business segments was in line with analyst expectations, which had crept up beyond the First Call numbers in the days preceding the release of fourth-quarter results.
Net marketing services revenue in the fourth quarter, boosted by the acquisition of the Overture Services pay-per-click search engine operator, amounted to nearly $393 million, double the marketing services number reported last year.
On the call, Semel said the company's marketing services revenue grew more than 40% on an organic basis -- that is, excluding acquisitions -- and gained momentum throughout 2003. He forecast that ad revenue would grow an additional 25% to 30% in 2004, exceeding the 20% growth in online advertising that some observers expect.
Fees revenue grew 37% from the prior year to $85.2 million in the fourth quarter, driven by the company's Internet access offering with
SBC Communications (SBC Quote), small business services and personals. The company has what it calls "paying relationships" with nearly 5 million Yahoo! users, up from 4.3 million at the end of the third quarter.
Listings revenue grew 21% to $33.2 million, thanks to the company's HotJobs business and other activities.
Excluding contributions from recently acquired businesses, Yahoo! is forecasting organic revenue growth of 31% to 36% in the first quarter of 2004 and 25% over the full year.
The stock has nearly tripled over the last year as
Wall Street has rediscovered its love of pricey growth
plays in the Internet and telecom businesses. Yahoo!
has impressed shareholders over the last year by
expanding its business and boosting its profit
margins, but the company's shares continue to trade in
the neighborhood of 90 times 2004 earnings estimates.
