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Yahoo! Shines Through

Other tech names falter behind a mixed report from Intel, but the Net remains an area of strength.

About everything that could go right did go right for 



in the third quarter.

Investors responded to Tuesday evening's

earnings blowout by pushing the stock up more than 6% Wednesday. J.P. Morgan reiterated an overweight rating and $50 price target, while Goldman said the shares could trade as high as $44 based on so-called implied value modeling. SG Cowen predicted the shares would outperform the market by 20% over the next 12 months.

Yahoo!'s rise was doubly impressive, coming as it did on the heels of a mixed report from


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that hit many of the big tech names Wednesday. At midday, Yahoo! was up $2.12 to $35.82.

The growing strength of the Sunnyvale, Calif., company underscores Yahoo!'s reach with advertisers. They want to attract users drawn to features such as financial news, fantasy sport and email. The company's success also focuses renewed attention on rival


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, which is due to post its own quarterly earnings late Thursday. Last quarter, investors were spooked by Google comments that seemed to point to seasonal weakness in sales.

"They were very cautious during the last call," said Philip Remek, an analyst with Guzman & Co. who rates Google and Yahoo! underperform and doesn't own either shares, in an interview. "You didn't see much seasonal weakness at Yahoo!."

Revenue, excluding the so-called traffic acquisition costs that Yahoo! pays its Web advertising partners, rose to $932 million from $655 million a year earlier, beating Wall Street estimates of $918 million. Though Yahoo!'s net income of $254 million, or 17 cents, was largely unchanged from a year earlier, the company also beat analysts' 14-cent average profit forecast. The latest-quarter earnings included a penny-a-share gain from the sale of stock.

Marketing services revenue rose 46% from a year ago to $1.16 billion on a gross basis, before subtracting traffic acquisition costs. Fee revenue rose 55% on that basis to $170 million. The number of customers who pay Yahoo! for a service rose 50% to 11.4 million.

Yahoo!'s strong performance was "really across the board," Chief Financial Officer Susan Decker said in an interview.

Yahoo!, Google and


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MSN are also trying to win over local advertisers who may not have experience in advertising on the Web. Though local search is a small portion of the overall market now, its importance is expected to grow.

"It's one of many great opportunities," Decker said, referring to search.

Other new markets that the companies are looking to conquer include video search and specialized search in areas such as blogs.

"There are upstart companies in all of those areas," said Guzman's Remek. "The beta video versions of video search from the big companies that I have seen so far have not been very impressive."