Yahoo!'s (YHOO) 'Better-Than-Feared' Fourth-Quarter Results: What Wall Street's Saying - TheStreet

Yahoo!  (YHOO) reported stronger-than-expected fourth-quarter results on Monday, but the beat was largely overshadowed by an update on the internet giant's pending $4.8 billion Verizon (VZ) - Get Report deal. 

The acquisition was expected to close in the first quarter of 2017, but due to the recent string of hacks, that time frame has been pushed back to the second quarter in order to "meet closing conditions," Yahoo said in a statement. The hacks also prompted an SEC investigation into whether Yahoo should have reported the issues to investors sooner. 

Analysts had debated whether or not the two massive data breaches would affect the company's top and bottom lines, but that didn't appear to be the case in yesterday's results. 

Shares of Yahoo were climbing 4% to $44.08 on Tuesday morning. Chinese e-commerce giant Alibaba (BABA) - Get Report, which reported strong earnings early on Tuesday, was up 3%. Yahoo owns about 15% of Alibaba. 

After Monday's market close, Yahoo reported adjusted earnings of 25 cents per share on revenue of $1.47 billion. Wall Street was looking for adjusted earnings of 21 cents per share and $1.30 billion in revenue. 

Search revenues fell 13% year-over-year to $333.8 million (adjusted to account for a change in the way Yahoo reports revenue), which was below Wall Street's expectations for $349 million. Display revenue, excluding the accounting change, was $496.7 million, beating analysts' projected $478 million.

Yahoo CEO Marissa Mayer said in a statement that she was "pleased" with the company's fourth-quarter results given that the past year has been "uniquely eventful" for Yahoo.

Wall Street remained similarly positive about the results, believing the Verizon deal seems to be intact. Here's what they had to say: 

Neil Doshi, Morningstar (Neutral, $42 Price Target) 

"Yahoo announced that the deal would get pushed from 1Q to 2Q (which is in-line with the original target date in the merger agreement). We believe that this is less about the integration work and more about additional due diligence related to the 2013 & 2014 Yahoo data breaches. It is likely that Verizon may require Yahoo to set aside some portion of cash for any potential liabilities rather than trying to lower the purchase price."

Youssef Squali, Cantor Fitzgerald (Overweight, PT raised to $51 from $50)

4Q16 results were better than feared...but mobile, video, native and social ads [mavens] continue to disappoint. Mavens revenue decreased 5% y/y to $450 million vs. -6%/-4% in 3Q16/2Q16, respectively, representing 40% of traffic-driven revenue in 4Q16. Mobile revenue increased 10% y/y to $319 million, representing 29% of traffic-driven revenue in 4Q16."

Ronald Josey, JMP Securities (Market Perform)

"In terms of quarterly highlights, we were encouraged to see display net revenue growth of 5%, the second consecutive quarter of positive growth in display and email revenue grew 34% year-over-year as email usage appears to have stabilized as monetization improves. However, net search revenue decreased ~14% year-over-year as paid click growth and search click revenue continued to decline..."

Brian Fitzgerald, Jefferies (Hold, $48 PT) 

"Yahoo core turned in a good quarter as it continues to ready itself to be acquired by Verizon. The terms of the deal have not changed and Yahoo remains confident that the deal will close by April 24th. No new information was shared around how Altaba plans to monetize its stake in Yahoo Japan or Alibaba. Also, no new information was shared around how cash will be returned to shareholders following the completion of the sale."

Stephen Ju, Credit Suisse (Neutral, PT raised to $50 from $49)

"While the results at the core were overall better-than-expected, fundamental results understandably take a back seat as investor focus remains on incremental updates to the status of the acquisition from Verizon. Despite the incremental [closing date] change, Verizon does seem incrementally closer with six of Yahoo's current board members set to resign. As we have noted before, the bull case on Yahoo shares boils down to what the IRS may do post sale, and as that from a fundamental standpoint is not something we can predict with any precision..."

Jason Helfstein, Oppenheimer (Outperform, PT cut to $52 from $54)

"4Q results exceeded our estimates and guidance on revenue and margins. We believe that the sale will be completed regardless of Yahoo's most recent hacking disclosure, as 1) Yahoo provided engagement data showing minimal impact vs. pre-hack and 2) Verizon needs Yahoo's content scale to create a profitable ad tech stack, if they are going to build a competitive 'third stack' to help publishers compete with Facebook (FB) - Get Reportand Alphabet's (GOOGL) - Get Report Google." 

Kunal Madhukar, SunTrust (Hold, $42 PT)

"We continue to believe Yahoo remains attractive to Verizon. If user engagement has remained consistent despite the security breaches, as Yahoo has tried to show around the Sept. and Dec. notifications, Verizon may not consider the impact to be material. Yahoo is likely a motivated seller given the value that can be unlocked in its Alibaba shares. However, the final outcome likely will remain uncertain until the investigations are complete." 

Rob Sanderson, MKM Partners (Buy, PT decreased to $50 from $51)

"Potential harm from security breaches is not shwoing in user engagement or advertiser demand and remedial costs have been negligible. We still think Verizon is getting an attractive price at 5.5x trailing EBITDA, which we believe was significantly depressed by strategic decisions." 

Brian Wieser, Pivotal Research (Hold, $41 PT)

"While usage trends may not be identifiably worse because of the security breach, that doesn't mean that there won't still be fall-out. There are still risks of fines from regulators, lawsuits and changes in consumer usage of Yahoo that may be beyond the scope of the data provided by the company on the release, and the delayed closing of the sale of the operating business to Verizon probably adds to risks in this direction."

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