As the Internet sector continues to take a beating, it is becoming
apparent that Yahoo! Corp.’s {YHOO}
stock, which typically trades up in anticipation of a positive
earnings report, may perform more in line with current trends.
Yahoo! 52-Week Stock-Performance Chart
But analysts say that first-quarter
earnings from Yahoo! -- one of the top portals of choice --
won’t disappoint Wall Street, which is estimating 9 cents a
share vs. 3 cents a share in the year-earlier period. The company
is expected to report its results on Wednesday after the close.
"As the company has in the past
three years or so, I would expect them to exceed top- and
bottom-line efforts," says analyst Derek Brown of WR
Hambrecht & Co. "Business continues to be strong for the
company, and management is more than capable of capitalizing on
the opportunities it has."
Brown rates the stock "buy,"
and has a 12-month price target of $400 on Yahoo! shares.
And with the potential merger of top
competitor America Online Inc. {AOL}
and Time Warner {TWX},
how does this change the competitive landscape for Yahoo!?
Brown says the AOL-Time Warner deal bodes
well for Yahoo! because it now stands as the largest independent
distribution point for online content and services. "At the
end of the day, AOL owns content that is in their best interest to
promote," Brown says. And that could be a benefit to Yahoo!,
which could pick up some business from AOL's content providers.
But should the AOL-Time Warner deal go up
in smoke, industry watchers say it could have a negative impact on
the entire portal space.
"It might be seen that the online
media industry is not easy to integrate," says U.S. Bancorp
Piper Jaffray analyst Safa Rashtchy. "The AOL-Time Warner
deal was a major watershed event, and major advertisers could see
it as a big wake-up call that traditional media could not get an
online presence." If the deal doesn’t happen, Rashtchy
says, it will be a setback to every expectation on converging
online media with the traditional side.
While AOL attempts to complete the big
dance down the aisle, Yahoo! is wasting no time expanding its
efforts in hot areas like business to business, or B2B. The
company spent the better part of the mid-1990s building traffic
– now up to 505 million average daily page views -- including
Yahoo! Japan -- and the past two years expanding into e-commerce
-- which represents about 30 percent of total revenue in the first
quarter, according to Merrill Lynch Internet analyst Henry Blodget.
Currently, the portal has an agreement
with Hewlett-Packard Co. {HWP}
to implement its intranets for corporate clients and the B2B
marketplace. Yahoo!'s new B2B marketplace at B2B.yahoo.com, is a
one-stop directory with more than 48,000 listings and more than
650 categories.
In a recent research report, J.P.
Morgan’s Susan Walker White writes: "Yahoo! is smartly
focusing on small- to medium-size businesses. This is a fragmented
group of buyers and sellers and represents a rapidly growing
market."
By the end of 2000, Piper Jaffray expects
Yahoo! to have a clear presence in B2B and business-to-employee,
or B2E, areas, which will propel its growth into 2005 and beyond.
"The B2B efforts are kind of a trump
card," Rashtchy says. "This area could generate about 30
percent of its revenue in the next three to five years. The
magnitude of this opportunity for the company is huge."
The market for Yahoo!, the analyst adds,
won't just be about advertising, direct marketing, e-commerce and
B2B. "This could be a $4 billion to $5 billion company in a
few years."
But Needham & Co.’s Dalton Chandler
doesn’t expect Yahoo! to sink large sums of cash into the B2B
pot of gold. "Certainly, there’s nothing wrong with giving
it a try, but they’re one of thousands of companies trying to do
it," he says.
Indeed, says Chandler, it makes sense for
Yahoo! to expand into B2C, such as consumer auctions, since that
is the company's target audience. But he sees no particular
advantage for the company in the B2B arena.
Citing valuation concerns, he rates the
stock "hold."
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