Yahoo!: Growth at Last (And Don't Forget Alibaba!)

Yahoo! posts revenue growth for the first time in five quarters.

Apr 15, 2014 at 7:00PM

Another volatile day of trading, but the result is another day of gains for U.S. stocks, as the benchmark S&P 500 finished up 0.7% on Monday. The narrower Dow Jones Industrial Average (DJINDICES:^DJI) rose 0.6%. Even the technology-heavy Nasdaq Composite Index (NASDAQINDEX:^IXIC), which has been highly volatile recently, managed to gain 0.3%, after having been down close to 2% intraday. The root of the Nasdaq's volatility has been the reversal in momentum in some high-flying "new tech" shares, but two of the best-known "old tech" names, Intel and Yahoo! (NASDAQ:YHOO) provided support to the index in today's run-up to their after-hours earnings announcements. If the after-hours price action is any indication, they'll continue to do the same tomorrow -- Yahoo!'s shares were up 6.5% at 6:50 p.m. ET.


On the headline numbers: Yahoo! beat Wall Street expectations on (adjusted) earnings per share, with $0.38 against a consensus estimate of $0.37, but, more importantly, they beat on revenues for the first time in at least five quarters. Better still, revenues (after traffic acquisition costs, or TAC) grew for the first time in five quarters, albeit by just 1%. CEO Marissa Mayer has now been at the helm of Yahoo! for over 18 months, so revenue growth is a key indicator of the success of her turnaround efforts and is vital to sustaining the momentum of that turnaround. Display revenue ex-TAC rose 2%, while search revenue ex-TAC grew a healthy 9%.

In terms of guidance, revenue ex-TAC for the current quarter is expected to come in between $1.06 billion and $1.1 billion -- in line with the $1.08 billion consensus estimate. The midpoint of that range would translate into year-on-year growth of 0.8% -- meager growth, but growth nevertheless.

Beyond the issue of revenue growth, a major point of focus for investors was Alibaba's results. Yahoo! owns a 24% stake in the Chinese e-commerce company, which is preparing to go public at a valuation that will likely exceed $100 billion. In light of the most recent numbers, that figure now looks more like a floor on the valuation. Yahoo! announced that, in the December quarter (the most recent for which data is available), Alibaba's revenue rose 66%, an acceleration from the 51% growth reported for the previous quarter -- that's a stunning number!

The perspective of an Alibaba IPO has no doubt been one of the factors that has juiced Yahoo!'s impressive stock price performance under Mayer's tenure (the shares have roughly doubled during that period). That's not a factor that is within her control (although the use of any proceeds from a share sale certainly are), but the current quarter suggests her turnaround strategy of small acquisitions to "refresh" Yahoo! and an emphasis on the portal's key properties (the main page and Sports, for example) appear to be gaining traction.

However, the numbers also show that while Yahoo! has improved, the environment hasn't gotten any less competitive -- going up against Google and new entrants, including Facebook and Twitter, remains a very tough challenge.

Next-generation tech winners: 3 stocks poised to be multibaggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multibagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

Alex Dumortier, CFA, has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A and C shares), Twitter, and Yahoo! and owns shares of Facebook and Google (A and C shares). Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information