Yahoo Shares Feel Pressure Ahead of Next Week's Earnings
For a while recently, it looked like Yahoo shares might start pulling out of their longtime $16 range, boosted by various and sundry rumors about the sale of its Asian assets and other machinations.
But, as worries about its next earnings call in less than a week coalesce, the Internet giant’s stock has settled right around its 50-day moving average of $16.59, closing down 1.85 percent at $16.50 yesterday.
That’s not bad given the stock has a 52-week low of $12.94 (and a 52-week high of $19.12).
But, it did not stop Morgan Stanley from downgrading Yahoo shares on Monday and cutting its revenue and earnings estimates.
The reason? “Deteriorating fundamentals” and a belief that “users will increasingly consume media/content on Facebook vs. Yahoo!”
You think? (As Yahoo has found, it appears that the kids love to social network!)
Thus, despite a healthy valuation for those Asian assets in the Alibaba Group and Yahoo! Japan and some speculation about the sale of them–the lack of any revenue growth in Yahoo’s core U.S. market is still the big drag on the Silicon Valley icon.
Because of that, there has also been increased short seller activity recently, which means all eyes will be on Yahoo’s fourth-quarter earnings release next Tuesday, Jan. 25.
Currently, Wall Street analysts expect higher earnings of 22 cents a share on revenue of $1.19 billion for Yahoo.
That revenue number is lower than a year ago, due to a weakening display advertising business and declines in search ad revenue at the company.
And it will not help if Google, as expected tomorrow, turns in a blow-out quarter, especially if it shows strength in its own display business.
So, after its continued lackluster revenue in the last quarter, top executive turnover in its media business and layoffs in December, investors are going to be expecting some long-promised sign of turnaround from Yahoo CEO Carol Bartz.
Whether she can finally start to deliver on that or not next week remains to be seen.