Is Yahoo! Finally Back?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Yahoo! (Nasdaq: YHOO  ) dealt shareholders another mixed bag with yesterday's first-quarter report.

The bad news? Revenue before traffic acquisition costs fell by 2% to $1.13 billion, short of the $1.17 billion that analysts were expecting. The top line was weighed down by an 11% slide in fee revenue and a surprising 14% dip in search advertising.

The good news? Earnings nearly doubled to $0.15 a share, after backing out the positive one-time items related to Microsoft's (Nasdaq: MSFT  ) transition-cost reimbursements and its January sale of Zimbra to VMware (NYSE: VMW  ) .

Perhaps the most positive development at Yahoo! is that its display-advertising business rose by 20% during the period, and up a sharp 24% in guaranteed display.

This is huge news. Yahoo! has been shedding some of its fee-generating assets, including the pending sale of HotJobs to Monster Worldwide (NYSE: MWW  ) . Its search deal with Microsoft kicked in two months ago, drawing clouds over the search advertising business that seems to rock for Google (Nasdaq: GOOG  ) and Baidu (Nasdaq: BIDU  ) but has never lived up to its potential for a stand-alone Yahoo!

In other words, display advertising is going to be the name of the game at Yahoo! in the future, and momentum is clearly working in its favor there. It also has $1.3 billion in cash and another $1.9 billion in short-term securities in case it needs to beef up its organic growth on that front.

Google and Baidu are no doubt singing the praises of paid search, given the companies' impressive margins, but let's not dismiss the potential of graphical ads slapped on content pages as the advertising market bounces back.

Yahoo! and AOL (NYSE: AOL  ) have hitched their wagons to the display niche. Doing so was probably a poor choice during the market downturn, but those wagon wheels are finally starting to turn.

Is Yahoo! finally back? Share your thoughts in the comments box below.

Microsoft is a Motley Fool Inside Value recommendation. Google and VMware are Motley Fool Rule Breakers selections. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletter services free for 30 days. One of them may be just what you're "searching" for.

Longtime Fool contributor Rick Munarriz owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (5)

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1159476, ~/Articles/ArticleHandler.aspx, 10/24/2016 1:44:55 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
YHOO $42.17 Down -0.21 -0.50%
Yahoo CAPS Rating: **
BIDU $176.76 Up +1.59 +0.91%
Baidu CAPS Rating: *****
GOOGL $824.06 Up +2.43 +0.30%
Alphabet (A shares… CAPS Rating: *****
MSFT $59.66 Up +2.41 +4.21%
Microsoft CAPS Rating: ****
VMW $72.91 Down -0.35 -0.48%
VMware CAPS Rating: ***