- Merrill Lynch is lowering their 2007 estimates on Yahoo (NASDAQ:YHOO) to reflect near-term Panama search monetization and management reorganization uncertainty. Firm thinks lower 2007 guidance versus published estimates is anticipated by the street, however Yahoo! stock may face pressure into the Jan. earnings call owing to guidance related uncertainty. Firm is lowering their 2007 revenue and EBITDA assumptions, which remain below consensus, to 15% growth from 18% (consensus is at 20%). They expect stock support above $23 (9x 2008E EV/EBITDA), and note that advertisers transitioning to Panama are generally positive on campaign management software tools, but remain divided on short-term impact of upcoming marketplace design (algorithm) changes, which warrants some near-term caution.
Pressures on 1H'07 revenue growth will include Panama transition, MSN loss, Daum affiliate loss, higher TAC rates and, potentially, the recent management reorganization. Firm notes their are optimistic that new partnerships and branded ad network opportunities in 2007 will help offset some of the affiliate losses to Google. Internet advertising industry growth remains robust, external data indicates that Yahoo! is holding US query share, and Panama opportunity is large, which is the basis for their positive long-term view on the stock given current valuation.
Firm's base case scenario for Panama assumes 8.5% core 4-year EBITDA growth (excluding search monetization) and a 70% improvement in search query monetization from Panama over 4 years. In this scenario, they value the stock at $32 based on 13x 2008E EBITDA.
2007 estimate changes:
Lowering revenue to $5.23bn (15% growth) from $5.34 bn
Lowering adjusted EBITDA to $2.15bn (15% growth) from $2.21bn
Lowering adjusted EPS to $0.75 (13% growth) from $0.78.
Notablecalls: I don't see this on as actionable. Good to know category.
Pressures on 1H'07 revenue growth will include Panama transition, MSN loss, Daum affiliate loss, higher TAC rates and, potentially, the recent management reorganization. Firm notes their are optimistic that new partnerships and branded ad network opportunities in 2007 will help offset some of the affiliate losses to Google. Internet advertising industry growth remains robust, external data indicates that Yahoo! is holding US query share, and Panama opportunity is large, which is the basis for their positive long-term view on the stock given current valuation.
Firm's base case scenario for Panama assumes 8.5% core 4-year EBITDA growth (excluding search monetization) and a 70% improvement in search query monetization from Panama over 4 years. In this scenario, they value the stock at $32 based on 13x 2008E EBITDA.
2007 estimate changes:
Lowering revenue to $5.23bn (15% growth) from $5.34 bn
Lowering adjusted EBITDA to $2.15bn (15% growth) from $2.21bn
Lowering adjusted EPS to $0.75 (13% growth) from $0.78.
Notablecalls: I don't see this on as actionable. Good to know category.
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