Week In Review: Google, Yahoo, AOL, Yelp
Internet stocks traded down for the week, in conjunction with the broader market that declined from the recent highs. As a result, the NASDAQ Internet Index (NASDAQ:QNET) is giving back some of this year’s advances, as investors capture gains on some of their best performing shares. In this report, we discuss some of the key events from the past week for Google (NASDAQ:GOOG), Yahoo (NASDAQ:YHOO), Yelp (NASDAQ:YELP) and America Online(NASDAQ:AOL).
During the week, Google selected HTC to manufacture its upcoming 9-inch Nexus tablet, the Wall Street Journal reported, citing people familiar with the matter. This signals that Google remains committed to launching new tablets at lower price points, and strengthening its position in the growing Tablets space. In other news, Google has abandoned Google+ signup requirement for new Google accounts. While it is too early to comment on this development, this can be seen as a an attempt by Google to de-emphasizing on its three year old social offering.
For the week, Google’s stock traded close to $575 last week. Our valuation of $544 (market cap of $335 billion) for the company is 5% lower than the current market price (market cap of $354 billion). We expect Google to report revenue of around $63 billion and net income of $15.7 billion for 2014. We forecast non-GAAP diluted EPS of $19.41, which is below the market consensus.
Yahoo
Yahoo’s stock traded down, between $38 and $40 per share, last week, despite record listing of of the shares of its associate Alibaba, which is made its debut on the NASDAQ on last Friday. [1] Currently, we value Yahoo at $34.68 (market cap of $34.7 billion), which is 10% lower than the current market price (market cap of $38.74 billion). We are in the process of updating our model post Alibaba’s IPO. However, we expect Yahoo to report revenue of around $4.46 billion and net income of $430 million for 2014. We forecast non-GAAP diluted EPS of $1.32, which is slightly below the market consensus of 1.41 (Reuters).
Yelp
In the week, Yelp announced that it is now available in Hong Kong, and in 29 countries total, following the company’s Japan debut earlier this year. This news marks Yelp’s third major push into Asia, in addition to its 2012 Singapore launch. [2] Yelp’s stock, after declining by 4% on Monday, traded between a narrow range of $72-$73 throughout the week. Our valuation of $60.44 (market cap of $4.4 billion) for the company is 20% lower than the current market price (market cap of $5 billion). We expect Yelp to report revenue of around $362 million and net income of $15.7 billion for 2014. We forecast non-GAAP diluted EPS of $0.21, which is below the market consensus of 0.40 (Reuters).
AOL
America Online (NASDAQ:AOL) has been focusing on its content and ad business in order to reduce its dependence on the internet subscription and content business. During the week, the company’s stocks outperformed the market as it traded steadily in the $42-$43 range, despite a sell off in broader market indices. The company announced that from October 6, Monday AOL will roll-out three new original series throughout the month of October. We believe that AOL is well positioned to capture share in the growing video online ads in the U.S. through these launches. Our valuation of $38.52 (market cap of$3 billion) for the company is slightly lower than the current market price of $43 (market cap of $3.4 billion). We expect AOL to report revenue of around $2.38 billion and net income of $220 million for 2014. We forecast non-GAAP diluted EPS of $2.82, which is inline with the market consensus of $2.83 (Reuters).
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- Yelp Launches in Hong Kong to Expand Asia Presence, September 24 2014 [↩]