SAN FRANCISCO (CBS.MW) -- Yahoo`s fourth quarter update after the close Tuesday should go a long way toward settling how quickly traditional advertisers are moving spending to the Internet.
Paid search is expected to remain the main driver for the anticipated 48 percent surge in December quarter revenue at Yahoo (YHOO: news, chart, profile), yet some analysts are looking for more traction from advertisers, including the financial services companies.
``Given its sizable traffic levels, Yahoo remains one of the top media buys for branded advertisers as they shift budgets to the Internet,`` noted Susquehanna Financial Group in a recent note to clients.
Yahoo, the No. 1-ranked destination on the Web, is expected to see sales of $754 million, up from $511 million in the fourth quarter of 2003. Analysts, on average, expecting earnings per share to rise to 11 cents a share, up from 5 cents a share in the year-ago period, according to a survey by Thomson/First Call.
Yahoo ranked as the No. 1 property on the Web, with 119 million unique visitors in December, according to comScore. Yahoo also accounted for 31 percent of the total searches conducted on the Web.
That`s behind Google (GOOG: news, chart, profile), at 34 percent, but above Microsoft`s (MSFT: news, chart, profile) MSN, at 16.5 percent. Yahoo also saw total searches rise by 29 percent from last year.
Yahoo shares have not experienced much a rally heading into the fourth quarter results, compared with the 10 percent and 12 percent gains ahead of the company`s fourth quarter results in the past two years. The lackluster market action could conversely augur well for Yahoo`s stock post-Tuesday, CIBC analysts concluded, citing the decline in Yahoo after the December 2003 and 2002 figures.
``We don`t expect the same to occur this year given the flat performance of late, particularly if Yahoo`s organic revenue growth rate re-accelerates and operating margins continue to expand nicely,`` CIBC said.
According to the Internet Advertising Bureau, Internet advertising should top $8 billion in 2004, up 9.6 percent from the $7.3 billion generated in 2003.
For all of 2004, Yahoo`s revenue is expected to rise 74 percent to $2.57 billion. It`s expected to earn 34 cents per share, up 86 percent, on those sales.
For the first quarter, Yahoo is projected to earn 11 cents a share on sales of $771 million. Analysts expect Yahoo to increase profit per share by 45 percent to 50 cents a share in 2005 on sales growth of 32 percent to $3.38 billion. Those figures reflect Overture Services` continued provision of advertisements across Microsoft`s MSN network through the end of 2005. The Yahoo and MSN relationship expires at the end of June 2006.
Shares of Yahoo added $1.37, or 3.88 percent, on Friday to close at $36.70.
EBay follows
EBay (EBAY: news, chart, profile) is scheduled to report fourth-quarter results after the close Wednesday. Analysts expect the online marketplace operator to earn 34 cents per share on sales of $932 million.
EBay last week announced price hikes on certain fees, notably rental fees to open up shop on its marketplace. See full story.
Some power sellers, however, have complained that the price hikes are too much, with one saying 1,000 stores have shut down. EBay wouldn`t comment on how many stores have closed down, beyond saying that stores shut down each day on its marketplace. Some sellers said they were considering leaving eBay and opening up shop on Overstock.com.
The net effect of the price hikes is included in most analysts` figures.
EBay shares rose $1.99, or 1.93 percent, to end Friday at $105.20.
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