Growth Talk Gooses Yahoo!

Updated from Oct. 9

Yahoo! (YHOO) rocketed 20% higher Thursday morning after the company's optimistic financial guidance Wednesday night.

The company posted a solid third quarter Wednesday evening, clearing a number of hurdles and making optimistic comments on its future numbers. Its stock rallied $1.98 to $11.96, leading a marketwide rally amid hope that the sputtering advertising business is showing signs of bottoming out.

Third-quarter profits hit $28 million, or 5 cents a share, beating the Wall Street consensus by a penny and reversing a year-ago loss of $24 million, or 4 cents a share. Revenue for the quarter ended June 30 came in at the high end of company guidance, jumping to $249 million from $166 million a year earlier, about 4% ahead of consensus estimates. EBITDA of $60.2 million was 25% better than the high end of Yahoo!'s predicted $38 million to $48 million range.

On a conference call with analysts, Chairman and CEO Terry Semel called the quarter's results a "strong validation of the course we've set for this company." Added Semel, "This is a growth story."

Ad revenue growth, says Yahoo!, came primarily from paid-search listings supplied by Overture Services (OVER). Fees and listings revenue was driven by online personal ads and the dial-up Internet access service Yahoo! offers in conjunction with SBC Communications (SBC).

Yahoo! is taking market share, said Semel, in several operations, including online advertising, job listings and personals.

While expecting economic conditions not to improve, Yahoo! executives were more optimistic about the prospects for advertising sales. "We're growing, and we're growing dramatically," said Semel. Excluding pay-per-click ad revenue, Yahoo! says marketing revenue grew sequentially over the first three quarters of 2002. Year-over-year, third quarter ad revenue declined less than 10%, said Yahoo!, though most of the decline was attributable to Yahoo!'s de-emphasis on barter -- that is, noncash -- ad revenue.