The Zacks Analyst Blog Highlights: Yahoo, Google, Microsoft, Walt Disney's and Facebook

The Zacks Analyst Blog Highlights: Yahoo, Google, Microsoft, Walt Disney's and
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PR Newswire

CHICAGO, July 16, 2012

CHICAGO, July 16, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Yahoo! Inc. (Nasdaq:YHOO), Google
Inc. (Nasdaq:GOOG), Microsoft Corp. (Nasdaq:MSFT), Walt Disney's (NYSE:DIS)
and Facebook Inc. (Nasdaq:FB).

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Here are highlights from Friday's Analyst Blog:

Earnings Preview: Yahoo! Inc.

Yahoo! Inc. (Nasdaq:YHOO) is scheduled to announce its second-quarter 2012
results on July 17, 2012. We witness a single upward movement in analyst
estimates in the build-up to the release.

Prior-Quarter Synopsis

Yahoo's first-quarter non-GAAP earnings were up 22.3% sequentially, better
than what most investors were expecting. The primary reasons for the earnings
growth were a lower tax rate and lower share count.

GAAP revenue for the quarter was down 7.8% sequentially and up 0.6% year over
year at $1.22 billion. The sequential decline was due to lower-than-expected
display revenue in the quarter. The gross margin was down 278 basis points
(bps) sequentially and 151 bps year over year at 67.4%. The operating margin
also shrunk in the quarter due to significantly higher S&M expenses.

Second Quarter Guidance

Yahoo expects revenue (ex-TAC) of $1.08 billion, down 11.2% sequentially. TAC
is expected to be $140–$150 million and other costs $915–$945 million. This is
expected to generate operating income of $115–$195 million.

(Detailed earnings results can be viewed in the blog titled:  Yahoo Tops, But
Guides in Line )

Agreement of Analysts

Out of the 23 analysts providing estimates, none revised the estimate for the
second quarter, in the last 30 days. Over the same period, 1 analyst made an
upward revision for fiscal 2012.

The majority of analysts expect a decent second quarter, with revenue coming
in line with management guidance. Though they do not expect any upside to the
display estimates in the second quarter, they believe that the display
business can return to double-digit growth in the third quarter. The analysts
believe that the company's restructuring initiatives will better align cost
with revenue, thereby improving the margin profile.

A few analysts remain optimistic about Yahoo shares as the company sells up to
half of its stake in Alibaba, or approximately 20% of its shares, back to the
Chinese e-commerce company for about $7.1 billion. The company intends to
distribute all its after-tax cash proceeds from the deal to shareholders, most
likely in the form of stock buybacks.

However, a bunch of analysts remain cautious about the headwinds that Yahoo!
Continues to see in its core display and search businesses. They remain
concerned about search volumes and believe that the organizational turmoil
will cause the company to grow at a slower pace in the near term than it might
otherwise have done. Additionally, the analysts believe that Yahoo! will
continue to lose share in the paid search market to its competitors, Google
Inc. (Nasdaq:GOOG) and Microsoft Corp. (Nasdaq:MSFT). Hence, they do not
expect strong second-quarter results.

Magnitude of Estimate Revisions

In the past 30 days, there was no change in the Zacks Consensus Estimate for
the second quarter as well as for fiscal 2012.

Over the 90-day period, the Zacks Consensus Estimate was up by a penny to 20
cents for the second quarter and by 12 cents to 94 cents for fiscal 2012.

Our Recommendation

Though Yahoo remains one of the biggest Internet names and has a position in
online search, it has been up against strong competition in search from
archrival Google for some time now. Though in the first quarter, search
revenue increased sequentially, we expect search market share to deteriorate
further and search-related issues to continue for a few more quarters.

The interim CEO Ross Levinsohn is working on areas other than its search
business to drive revenue. We believe that the company is focusing on
improving its content and looking to protect its share in the display and
video ad market. Last month, the company signed content sharing deals with
Spotify and Clear Channel to boost its online user base. Others include
agreements with CNBC and Walt Disney's (NYSE:DIS) ABC Television Group.

Very recently, Yahoo signed a new advertising partnership with Facebook Inc.
(Nasdaq:FB), settling all their pending patent lawsuits. This is a big
positive for Yahoo as it was spared from a long-drawn legal dispute.

Though Ross Levinsohn has been trying to grab all possible opportunities, we
still don't see a turnaround in the business. To make matters worse, the
management turmoil continues following the dismissal of its third CEO Scott
Thompson in just three years. We expect the company to formally announce Ross
Levinsohn as its new CEO during its second-quarter earnings announcement,
which should eliminate the uncertainty around its management team.

In the upcoming second quarter, we are unlikely to see robust revenue numbers
due to weakness in both the display and search businesses. However, gross
margin figures could come above expectations due to cost control measures
taken by management.

Yahoo shares carry a Zacks #2 Rank, implying a Buy rating in the near term
(1–3 months).

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