Yahoo shares gained Wednesday in pre-open trading following its fourth-quarter earnings and after brokers lifted their ratings and targets on the Internet company.
Shares in Yahoo (YHOO:) were last at $37.80 in trading on Instinet after the company said fourth-quarter profit nearly tripled, driven by revenue gains in paid search and branded advertising
Yahoo shares closed up 48 cents to $37.18 on Tuesday.
Banc of America raised its price target on the U.S. Internet giant to $43 from $39. Analyst John Janedis also lifted his 2005 earnings estimate to 53 cents a share from 51 cents and his revenue forecast to $3.52 billion from $3.4 billion.
``We maintain our ``buy`` rating on the stock and continue to think it will be the biggest beneficiary of the secular shift in advertising dollars from offline to online advertising mediums,`` analyst John Janedis said in a note to clients.
Jeffries also upgraded Yahoo, to ``buy`` from ``hold,`` and increased its price target to $43 from $36, citing bullish guidance. The broker raised Yahoo`s 2005 estimates for fiscal-year earnings per share to 56 cents from 50 cents and 2006 estimates to 72 cents from 65 cents.
Late Tuesday, Yahoo said it earned $373 million, or 25 cents per share. Excluding a one-time gain from its investment in Google (GOOG:) , Yahoo earned $187 million, or 13 cents per share, up from 5 cents in the year-ago period. Analysts expected the company to earn 11 cents a share on that basis, based on a survey by Thomson First Call.
Quarterly sales grew 62 percent to $1.078 billion, topping $1 billion for the first time. Excluding the cost Yahoo pays to Web distribution partners, revenue grew to $785 million, topping analysts` estimates of $756 million.
Shares of Yahoo rose 35 cents to $37.05 in regular trading Tuesday. The stock rose 1.5 percent to $37.75 in after-hours action.
Large corporate advertisers are spending more on Internet ads, and those that try Yahoo are becoming long-term clients, according to Yahoo Chief Operating Officer Dan Rosensweig.
``We had 100 percent renewal rate by our top 200 advertisers,`` Rosensweig told CBS MarketWatch in an interview.
The top 100 marketers as measured by trade publication Ad Age spent 55 percent more in branded advertising on Yahoo in the fourth quarter than the year-ago period, the executive said. The aggregate spending in the fourth quarter was also equal to the entire advertising spent in 2002, he added.
The fourth quarter also saw financial services firms and large retailers boost their purchases of keyword searches.
While branded advertising revenue may be accelerating, it won`t see robust growth in the first quarter, typically a seasonally slow period for advertising.
Outlook and details
For the first quarter, Yahoo said it expects to generate sales between $765 million and $805 million. Analysts expected Yahoo to generate sales of $773 million in the March quarter.
As for the full year, the Sunnyvale, Calif.-based company said it expects to generate sales between $3.365 billion and $3.565 billion.
Analysts expect Yahoo to increase profit by 45 percent to 50 cents per share in 2005, on sales growth of 32 percent to $3.39 billion.
Yahoo did not break out how much advertising would contribute to the overall revenue number, but marketing dollars continue to be the fastest growing and biggest component of Yahoo`s total revenue.
Marketing services, which include revenue from paid search and branded advertising, grew to $910 million.
Yahoo generated $129 million in its subscription business, as customers purchased services ranging from personal dating services, extra e-mail storage and Internet access through Yahoo`s joint offerings with SBC Communications (SBC:) , BT and Rogers Cable, based in Canada.
The listing business, which includes its HotJobs recruiting business, posted sales of $38 million.
The vision thing
Yahoo`s listing business will be added to the company`s marketing services line, Chief Financial Officer Sue Decker said on the conference call following Yahoo`s release. That`s because this revenue could be accounted for as advertising, she suggested.
Also on the call, Chief Executive Terry Semel enumerated four main priorities for the online media giant in 2005. The first priority is to have a ``deeper engagement`` with users as the world is ``rapidly moving to my media, with the user as the programmer,`` he said. ``Yahoo will seek to play a greater role in people`s connected life.``
Semel also said that Yahoo will be more aggressive overseas and that it plans to extend its leadership in advertising by providing more content that keeps consumers engaged, or on the site longer.
Expanding broadband video is one way for Yahoo to extend its leadership in advertising as more advertisers begin placing ads on video content.
In the interview with CBS MarketWatch, Rosensweig said that Yahoo continues to grow its video and music content. He pointed to the company`s relationship with JibJab as one example of how the media giant is bringing unique video content to its users.
Earlier in the day, Yahoo said it was debuting a video animation produced by JibJab -- a recently formed production company which gained tremendous publicity for ``This Land,`` a short video which featured President Bush and John Kerry during the 2004 presidential campaign. The clip was viewed more than 80 million times, Yahoo said. See Net Sense: Advertisers embrace video. Will Yahoo?
Rosensweig would not comment on whether Lloyd Braun, an ABC entertainment executive that Yahoo hired late last year, was creating original content for the company.
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