Yahoo! Inc. (YHOO) Information Technology - Internet Software & Services | Reports July 19, After Market Closes

Key Takeaways

• The Estimize community is looking for earnings per share of 10 cents on $835.70 million in revenue, right in line with Wall Street on the top and bottom
• Verizon (VZ) appears to be the frontrunner to acquire Yahoo’s core assets
• The stock was downgraded recently amid concerns of illiquidity and uncertainty surround the core business and its stake in Alibaba (BABA)

Drama continues to follow Yahoo and its CEO, Marissa Mayer, amid pressure to sell of its core assets sooner than later. As Yahoo continues to search for the highest bidder, it must report second quarter earnings. Earnings will be an afterthought to any claims management makes about the looming takeover. The final bids for the core business is expected around July 18th, a day before its earnings call, with bids ranging from $3.5 billion to $5 billion.

Unsurprisingly Q2 earnings aren’t expected to do much to sway shareholders dismay. The Estimize community is looking for earnings per share of 10 cents on $835.70 million in revenue, right in line with Wall Street on the top and bottom. Estimates have dropped considerably since its last report reflecting analyst’s lose confidence. Compared to the same period last year, earnings are expected to fall 43% with revenue dropping nearly 20%.

Yahoo has fallen from users and investors good graces, after dominating the search space at the start of the millennium. The once great search engine is now an afterthought to Google (GOOG) which is the current de facto search tool. Meanwhile its share of global digital advertising has dropped from 20% to around 3%, falling behind Google and Facebook (FB). 

Mayer and the board have continued to implement new innovations and overhaul the product to drag Yahoo out of the gutter. Yahoo recently revamped its mobile experience by launching a new app and homepage that allows users to more easily access a tailored newsfeed. Yahoo Sports and Finance, its two most successful assets, have seen updates that have continued to drive traffic.

Despite updates across the board mounting losses have pressured Yahoo to make even more change. This past quarter saw display and search revenue decline while cash on hand and operating cash flow deteriorated. Maven (mobile, video, native, social) revenue was the lone bright spot in this report that sent share prices plunging. Revenue in the category grew from $365 million to $390 million on a 38% increase in mobile traffic.

Even if things turnaround Yahoo still needs to shake things up at the top. Marissa Mayer’s days appear numbered with the company whether that is with the current or new management. With less than a week until bidding comes to a close, Verizon is the frontrunner to acquire the beleaguered company. 

Photo Credit: carvalho