Updated from 10:16 a.m. to include additional analysis in the second to last paragraph.
NEW YORK (TheStreet) -- Last year is over and now it's put up or shut up time for Yahoo! (YHOO) and CEO Marissa Mayer. With the Sunnyvale, Calif.-based Yahoo! set to report first-quarter earnings after the bell on Tuesday, investors will find out whether Mayer has much to squawk about or not.
Yahoo! and Mayer had a largely positive 2013 as investors realized the company's stake in Alibaba, the Chinese Internet giant, as well as Yahoo! Japan, helping send shares higher by 107.4% during 2013, far outpacing the Nasdaq. During the year, Mayer seemingly made acquisitions almost daily (exaggeration, but you get the point), buying companies such as Summly, Jybe, and a slew of other acqui-hires. The biggest acquisition in 2013 was the $1.1 billion purchase of Tumblr, as Mayer tries to boost core Yahoo! revenue, take the focus off of Alibaba and Yahoo! Japan, and shift it back to Sunnyvale.
Analysts surveyed by Thomson Reuters are looking for Yahoo! to earn 37 cents a share on $1.08 billion in revenue for the first quarter. Analysts surveyed by Estimize are looking for Yahoo! to earn 41 cents a share on almost $1.09 billion in revenue.
This year hasn't been as kind to Yahoo! and Mayer, with shares falling 17.3% year-to-date in 2014, compared to a 3.7% decline in the Nasdaq. Following the company's fourth-quarter earnings call in January, Mayer noted 2014 will start to see some acceleration in revenue, but towards the back half and only modestly.
"In 2014 we will continue our efforts around people, products and traffic while concentrating our efforts on revenue," Mayer said, noting that she expects the business "to exhibit stable momentum with modest acceleration in the second half of the year."
Though many of Yahoo!'s acquisitions have been focused on mobile, the company has little in the way of revenue to show for it. Mayer noted on the call that mobile revenue is still "not material," though it did nearly double year over year. Perhaps a hint that 2014 may be a year to buy revenue growth, Mayer said 2014 could see some revenue accretive acquisitions if they make sense. This comes despite spending $1.1 billion on Tumblr in 2013.
While revenue growth may be stagnant, Yahoo! is making headways in turning over its users to its various mobile products. Yahoo! now has over 800 million monthly active users (MAUs), with over 400 million of them using the company's products, including Yahoo! Sports, Finance and Flickr on mobile devices. With new additions to Yahoo!'s media team including stalwarts such as Katie Couric, David Pogue and others, users are increasingly turning to Yahoo! for content, but that still hasn't shown up on the company's top line.
Yahoo! appears to be trying to work on revenue accretive deals to combat Google's (GOOG) prowess in search. In March, Yahoo! finally announced its deal with Yelp (YELP), bringing Yelp's reviews, business information and star ratings to Yahoo! Search to try and boost the company's search business. This was done to compete with Google's Knowledge Graph, which incorporates a variety of reviews, images, data, and other information about a particular search query.
Much has been made about core Yahoo!, the company's display and search business, being worth little when looking at the company's market cap. Right now, Yahoo!'s market cap is just under $34 billion. Assuming a $150 billion market cap for Alibaba (Yahoo! owns 24%) and Yahoo! Japan being worth roughly $26 billion (Yahoo! owns 35% of Yahoo! Japan, which trades in Japan), core Yahoo! is worth less than nothing.
In late 2013, Mayer said turning around the core business would take around three years, something investors may have little patience for despite 2013 being a stellar year for the stock.
In the last quarter of 2013, Yahoo! noted display revenue fell 6% from last year to $491 million. The number of ads rose 3% year over year but prices continued to decline, falling 7% from the fourth quarter of 2012. Search continued to be the better operating segment, as revenue excluding traffic acquisition costs (TAC) rose 8% to $461 million. Paid clicks, excluding Korea, rose 17% year over year, but the price-per-click fell 3% from the fourth quarter of 2012. That doesn't exactly smack of optimism right around the quarter.
JMP Securities analyst Ronald Josey is looking for some sort of stabilization in display revenue, as Mayer's new advertising initiatives, including Stream ads, Tumblr Sponsored Posts and the launch of the Gemini ad marketplace take shape.
"Given improving user engagement and pricing growth across Yahoo!'s more traditional desktop display business," Josey wrote in a note, "we will be listening for progress from newer ad formats around mobile, video, and social. We will be focused on adoption and scale of Yahoo!'s native Stream ad units as our checks suggest Stream ad pricing is improving as the auction marketplace becomes more robust. Additionally, the launch of Gemini in mid-1Q as a unified marketplace for mobile search and Native / Stream ads could be helping to drive pricing growth."
Cantor Fitzgerald analyst Youssef Squali, who rates Yahoo! "buy" with a $40 price target, isn't expecting much this quarter as the focus continues to remain on Yahoo!'s Asian assets.
"We expect Yahoo! to report another muted quarter on Tuesday 4/15, after the close, in-line with expectations," Squali wrote in a note. "While 2013 represented a year of right-sizing, investment and acquisition, we think 2014 should be the year where monetization efforts drive a resumption in top-line growth, starting with 1Q:14. In the meantime, prospects for the highly anticipated Alibaba IPO this year, continued cost containment efforts, a recent stock pullback, and a buyback make for an attractive valuation, in our view."
This is the year where the rose bloom is off for Yahoo! and Mayer, and turnaround time goes in to full effect. With the pending Alibaba initial public offering coming within the next few months, much will be made about how Yahoo! spends the cash it receives from the IPO (Yahoo! is required to sell half of its 24% stake in the IPO), and whether the company can actually start to turn around in 2014.
When we last heard from Mayer, she said she was confident Yahoo!'s mobile efforts would be able to monetize this year. "We remain confident that there is a big opportunity for Yahoo and we will continue to focus and invest in mobile monetization in 2014," Mayer said on the earnings call. With the company focusing so much on mobile products, like the aforementioned Finance, Sports, Weather and various other content offerings, the time is now for Mayer and Yahoo! to demonstrate revenue growth.Otherwise, Mayer, who has never been shy of promoting the company or herself, may need to actually find something worth talking about before appearing in Vanity Fair again.
-- Written by Chris Ciaccia in New York
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