Yahoo!'s year-end results topped earnings expectations but fell shy on analysts' revenue projections, so the stock, which has doubled since October, is taking a breather. The company has impressively refocused after the advertising market imploded in 2000. For a notion of how badly things could have gone, look at AOL.
For 2002, Yahoo! achieved $221 million in free cash flow on $953 million in sales, up 33%. Much of the sales growth was in sponsored Internet searches and fee content. Net income was $43 million, or $0.18 per share, up from a loss of $93 million in 2001. Gross margin was 83%. After heady marketing and sales costs, operating margin was 9%. For 2003, estimates call for $0.25 in earnings per share, up 39%, on about $1.2 billion in sales, up 26%.
At $18.50 per share, the company has an $11.1 billion market cap. Accounting for its $1.5 billion in cash and equivalents, it has an enterprise value of $9.6 billion. That puts the stock at 43 times free cash flow. As with many stocks, valuation multiples look steep after earnings tanked, but an earnings rebound in the few years ahead would quickly reel in valuations. Yahoo! seems well-positioned for that.