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Yahoo ( YHOO ) approaching its Q1 earnings release, scheduled for after the close Tuesday, amid flaming financials and rampant speculation about which companies might bid for the wilting Web portal. First-round bids reportedly are due Monday. “At an operational level, Yahoo’s situation has gone from bad to worse in recent quarters, with poor choices at both the board and senior management levels compounding bad luck. At this point, virtually any change could help to unlock value,” wrote Pivotal analyst Brian Wieser in an April 11 research note. Yet, Yahoo has received two price-target boosts in the past week. Pivotal raised its price target on Yahoo stock to 40 from 35, primarily due to the higher current trading price of Alibaba Group ( BABA ). Most of Yahoo’s value comes from its 15% stake in the China e-commerce titan. Yahoo’s total market cap is $35.19 billion. Yahoo stock is trading near 37. Analysts polled by Thomson Reuters expect Yahoo’s Q1 revenue to fall 12% year over year to $1.07 billion. Yahoo is guiding Q1 revenue at $1.05 billion to $1.09 billion, down 14% to 11%. FactSet expects Yahoo to report revenue ex-TAC of $847 million, down 18%. TAC, or traffic acquisition costs, refer to fees Yahoo pays other sites to carry its ads. Yahoo TAC spending has climbed during each quarter of 2015. Analyst consensus calls for Yahoo’s EPS ex items to plunge 53% to 7 cents. But on Wednesday, SunTrust Robinson Humphrey gave Yahoo stock a boost, raising its price target to 44 from 40. SunTrust also maintained its buy rating on Yahoo stock and cited “hidden assets” that could drive up the bidding price for the struggling Web portal. Royalties from Yahoo Japan, thousands of patents and plentiful real estate could boost Yahoo’s bids, wrote SunTrust analyst Robert Peck in a research report. Minus a “potential upside” from those assets, SunTrust expects Yahoo to fetch bids in the $6 billion to $8 billion range for its core business. Yahoo ‘Stickiness Factor’ Lags Google, Microsoft Yahoo sent a letter to possible buyers last month, asking them to submit bids, which reportedly are due Monday. Some buyers might be interested in all or part of Yahoo’s core Web business, while others might want Yahoo’s stakes in Alibaba or Yahoo Japan. Some reports estimate that as many as 40 groups have expressed interest in the wilting Sunnyvale, Calif.-based Web portal, although Fortune said in a report on Friday that number was too high. Either way, news site Re/code said that documents Yahoo provided to potential bidders predict that the Web portal’s 2016 revenue will drop by close to 15% and its earnings by more than 20%. Yahoo stock has more than doubled since the company hired Marissa Mayer, who had been a top executive at Alphabet ’s ( GOOGL ) Google, as CEO in July 2012. But she’s been unable to spark significant earnings and revenue growth, and Yahoo has struggled to build online-ad and mobile-ad revenue vs. rivals Google and Facebook ( FB ), among others. In the meantime, the company faces a proxy fight from activist investor Starboard Value, which wants to oust Yahoo’s entire board. A study by Verto Analytics found that 229 million users accessed one of Yahoo’s online services at least once during March 2016 in the U.S., which puts Yahoo’s net reach in the U.S. at 92.5%. But, Verto said, the average 122.6 million users who access Yahoo’s services on a daily basis gives Yahoo a “stickiness factor” of 54%, much lower than Google’s 86% and Microsoft ’s ( MSFT ) 68%. In February, Yahoo announced that it will cut 15% of its workforce — roughly 1,600 jobs — and look to sell noncore divisions and assets, such as patents and real estate, as part of a strategic plan to return the company to what it forecasts as modest-though-accelerating growth in 2017 and 2018. Mayer’s turnaround plan includes continued investment in what the company calls “Mavens” — Yahoo’s mobile, video, native and social businesses — where its ad revenue is growing. Mayer said that Yahoo’s consumer products division will consist of three global platforms — search, mail and Tumblr — and that it will focus on four vertical markets: news, sports, finance and lifestyle. Scalper1 News
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