It's time for Yandex (Nasdaq: YNDX ) to shine.
Russia's leading search engine went public this morning, raising $1.3 billion by pricing its shares at $25. Odds are that you've never pointed your browser at yandex.ru, but it's the search engine one of the world's largest countries.
Yandex accounted for 64% of Russia's search traffic last year, commanding a slice in its home turf as thick as Google (Nasdaq: GOOG ) in the United States and nearly that of Baidu (Nasdaq: BIDU ) in China. Google and Baidu have been market-thumping stocks since going public in 2004 and 2005, respectively. Will Yandex follow suit?
The financials are promising, though the company's growth trajectory is closer to a mature Google than a Baidu speedster. The company's been profitable since 2003, but earnings did slip during the recessionary-smacked 2009. Revenue only mustered a 14% advance that year. Yandex bounced back nicely last year, with revenue soaring 43% to $439.7 million. Earnings of $134.3 million in 2010 resulted in juicy net margins of just over 30%.
Where does Yandex grow from here? There were 38.3 million unique visitors in March. Yandex also has operations in Ukraine, Kazakhstan, and Belarus, but it's unrealistic to expect material growth outside of Eastern Europe. The company's growth will largely rest on broadening Internet usage in Russia and advertisers' realization that new media leads are more valuable -- and measurable -- than old school platforms.
Social networking has been the dot-com flavor of the month. Between LinkedIn's (NYSE: LNKD ) huge pop and the initial euphoria for China's Renren (NYSE: RENN ) , investors have been chasing the barely profitable Web 2.0 darlings. Yandex reminds us that search still matters, and it's where profitability has been partying for years.
Yandex, Baidu, and Google have been posting healthy margins for ages as the regional leaders. How can you not make money as a well-trafficked search engine? It doesn't cost much to serve up small query result pages, and paid search finds advertisers bidding against one another for interested seekers.
If I had to choose between Yandex, LinkedIn, and Renren for my portfolio, I'd probably go with Yandex -- though seeing the promising Renren now falling into the pre-teens makes it an intriguing value as a busted IPO.
Yandex isn't cheap. It opened near $35 today, giving the stock a rich market cap of $11 billion. It's not as globally reliable as Google, which is the leading search engine in most counties outside of China, Russia, and Japan. It's also not growing as quickly as Baidu. However, buying into Yandex isn't a leap of faith. Web 2.0 websites come and go, but Google, Baidu, and Yandex have profitably dominated their regions for years.
Welcome to the show, Yandex.
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