Yippee For Yahoo! Earnings
Shares of Yahoo! closed down 2 1/4 at 184 Thursday after soaring 13 1/2 points higher at the start of trading. The Internet pioneer reported better-than-expected second-quarter earnings Wednesday and said it will split its stock.
Yahoo!'s stock was also boosted by positive comments across the board from analysts. Goldman Sachs analyst Michael Parekh boosted his earnings estimates for the company in 1998 and 1999. BancAmerica Robertson Stephens analyst Keith Benjamin maintained his "buy" rating. And Donaldson Lufkin & Jenrette set a $250 a share target price for Yahoo.
Besides reporting a better-than-expected 15 cents a share of profit for the second quarter and a 2-for-1 stock split, Yahoo! announced it was selling $250 million worth of stock to one of its institutional investors. The quarterly profit came before a charge against earnings.
The company's market capitalization on Nasdaq is now more than $9 billion. The shares earlier this week sold for as much as 207.
While many observers have called Yahoo! wildly overvalued, Japanese-based Softbank seems to disagree - even for a stock trading at about 645 times the past 12 months' revenue.
Softbank, which has stakes in numerous technology-related stocks, including First Virtual Holding and Ziff-Davis, is buying 1.363 million shares of Yahoo! for $250 million, or about $183.62 per share. The private placement will boost Softbank's stake in Yahoo! to 31 percent.
With Internet stocks experiencing a rocky ride in the past couple of days, many investors eagerly awaited the earnings report from Yahoo!, a pioneer and bellwether in the sector. It's also one of the few Internet companies to actually record any profits.
Excluding an acquisition-related charge, Yahoo! said it earned $8.1 million, or 15 cents a share, on $41.2 million in revenue for the quarter. Analysts had expected Yahoo! to earn 9 cents a share. The charge was for research and development linked to the purchase of ViaWeb.
Traffic on the company's various Web properties grew to 115 million page views a month, up from 95 million in the prior quarter, while the number of registered users increased to 18 million from 12 million.
"While we maintained our leadership position in audience reach among work users and continued to experience popularity among home users, we had significant growth in the number of registered Yahoo! members during the quarter," said Tim Koogle, Yahoo!'s president and CEO.
While a stock split doesn't change the valuation of a company, it can increase demand by making shares cheaper to buy. For instance, 100 hundred shares of Yahoo! - a typical purchase order - now costs more than $18,600. After the split Aug. 3, the cost to buy 100 shares will be cut in half.
Written By Darren Chervitz