YAHOO EARNINGS PREVIEW: Wall Street Is Looking For A Continued Bounce Back In Display Ads

carol bartz

Yahoo reports earnings this afternoon after the market closes. Tune in at 4 PM for live coverage of the results.

Google’s solid revenue results are providing encouragement for Yahoo’s earnings. The display ad market is bouncing back, and Yahoo should benefit.

Citi analyst Mark Mahaney has a $22 price target, and cites these 5 reasons in a note:

  • Clear Display Ad Recovery with YHOO Participation
  • Sig. Op Margin Expansion – 200 bps Y/Y expansion guidance for Q2, and full year Cash Costs guide of 1%-3% growth
  • Overall Usage/Search Share stabilisation
  • Good Capital Allocation incl. recent $3B share buyback authorization
  • Asia Assets Catalyst – probably not ’til 2011.

The key consensus estimates:

  • Net revenue: $1.16 billion
  • Operating income: $178 million
  • GAAP EPS: $0.14
  • Expect to hear questions about Yahoo’s acquisition of Associated Content, the big ad campaign for Yahoo, the fact that time spent on Yahoo keeps slipping, and questions about the Microsoft-Yahoo deal, as well as the usual questions about growth in display ads and content.

Here’s a cheat sheet from Citi analyst Mark Mahaney. Click here, or on image for a larger version.


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