This Company Is Looking to Reclaim Its Lost Glory
tarun is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This company has changed CEOs five times in the past five years. Its shares have tumbled from $28 a share in 2008 to $9.39, and since then have never seen the $20 mark. But with the appointment of a new CEO, Marissa Mayer, things seem to be falling into place. Since her appointment, the numbers have improved, the website looks lively, and the stock trades near its 52-week high.
Yes, I am talking about Yahoo! (NASDAQ: YHOO) the company that was lacking innovation in the last few years, but seems to be strengthening again.
Let us take a look at how things might shape up in the future and whether Yahoo! is the right stock to buy at this moment.
A first in the past four years, the company reported growth in revenue in its recent quarter. Revenue improved 2% to $1.35 billion, compared to 1.32 billion in the same quarter last year and more than 10% compared to the third-quarter of 2012. The non-GAAP EPS for the last quarter was reported at $0.32, 28% higher than the prior-year period.
To start with, the company has a strong cash balance of $8.41 billion and a very low debt burden of $126 million, which can help it finance its future projects with ease. Yahoo! has two very popular products, Yahoo! Mail and Yahoo! News which it can capitalize on. Yahoo! Finance is still the most user-friendly sight for investors, deriving a lot of volume on the website.
Yahoo! has been late in moving into the mobile segment, unlike its competitors who have their own browsers, operating systems, hardware, and tablets, but the company seems to be improving in the mobile apps world. The company, in order to become more alluring for its mobile users, redesigned its email service last December.
As per Yahoo!’s deal with CBS Television Distribution, The Insider will be renamed omg! Insider and will promote a multiplatform entertainment series. Yahoo’s already popular omg! Network, with 30 million viewers each month, should draw more traffic as it would be the only place where fans of The Insider can find the updated videos of the show.
Moreover, Yahoo!’s partnership with NBC Sports will increase the former’s sports coverage on television and the latter’s online reach. The companies, without spending in a joint venture, have agreed to cross-promote each other and derive mutual benefits of each other’s audiences. Apart from increasing traffic, both these deals should improve Yahoo!’s top and bottom lines.
Google (NASDAQ: GOOG) competes with Yahoo! in almost all its businesses and also outclasses in most of them. According to a survey, Yahoo! Mail has slightly more desktop users than Gmail, but Gmail’s mobile apps drives a lot of traffic which has not been accounted for. Google’s search engine is the leader in the market, as it provides more relevant information and saves time compared to its competitors.
The company also rules the online advertising market with more than 41% market share while Yahoo! managed a paltry 8.4% and Facebook (NASDAQ: FB) 5.8 % in 2012, according to eMarketer. The striking point about these numbers is that Facebook is gaining market share while Yahoo!’s market share is declining.
Google provides each of its advertisers a tool to track the number of views on each of their ads displayed which helps them in analyzing and interpreting the performance of their advertisements. Facebook, with its latest technology called conversion tracking, puts itself a step ahead of Google. Conversion tracking helps the advertisers to know how many clicks actually converted into sales which can help them redesign their advertisements to the taste of the consumers to maximize sales.
Calling Google’s Android operating system as the heart of smartphones wouldn’t be an exaggeration. Smartphones have a very wide telescoping market and with no other parallel mobile application, Google comes out as a clear winner on this front too. Thus, the company has a dominant market position in most of its businesses which guarantees good flow of operating cash.
Let’s face it
Since getting listed, Facebook was not seen as very high revenue generating social networking site, as users were not willing to pay money for being in touch with their friends. But the company has found other modes of generating revenue. As mentioned above, its advertisement market is consistently emerging. It is growing at a pace of 15% annually.
Moreover, the social networking site makes a lot of money from the ads that they show while people play online games. It is consistently trying to monetize its large human database and after going through the numbers, and it seems it has been successful to a certain extent.
Yahoo! is trying to turn around its operations under the guidance of its new CEO to make itself a profitable investment. Yahoo! Sports and Yahoo! Finance have the potential to become very popular on mobile devices if the company expands its operation in this field. The company currently looks more stable than it has been for the last five years, and it seems to be the right time for long-term value investors to purchase it.
tarunbachhawat has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!