Wednesday, March 07, 2007

Calls of Note Part 1

Couple of Tier-1 firms have positive comments on Yahoo (NASDAQ:YHOO) after the co presented at MS Tech conference yesterday:

- Morgan Stanley notes Terry Semel, Yahoo!'s Chairman & CEO, and Sue Decker, acting CFO & Head of Advertising Product Group, highlighted that Yahoo! should continue to benefit from favorable secular trends in online advertising. They addressed a number of new / current initiatives related to search / branded advertising + video + social media + mobile + off-network partnerships (Right Media + eBay + newspaper consortium). Post-Yahoo!'s successful release of Panama + reorganization of its structure and management in 12/06 to better focus on audiences, advertisers, and publishers, the firm feels more confident in the company's ability to capture future growth opportunities.

Yahoo! noted that the Panama launch and the new ranking algorithm (2/5/07), as expected, resulted in a noticeable lift in search volume, click-through rates, higher quality leads, and advertiser / user satisfaction. Given yesterday's remarks and firm's analysis of early signs of success for Panama, they continue to believe Yahoo!'s outlook is strong. In addition, experience with the new search offering and recent checks with advertisers / agencies / search engine marketers (SEMs) / developers / industry leaders to date confirm their hypothesis that Panama represents a major improvement over Yahoo!'s prior offering and a more competitive product. And, hey, as investors, they like the type of accelerating Y/Y revenue growth YHOO should support as 2007 quarters evolve. Reits Overweight.

- Merrill Lynch is upping their tgt on YHOO to $34 from $33 as management confirmed that the Panama algorithm launch has gone "quite well", with increasing click-through rates, higher quality leads for advertisers, and some cost-per-click pressure (as expected). These changes should generate higher ROI for advertisers, which should lead to more ad dollars for Yahoo! in the back half of the year. On a recent ML hosted call, comScore indicated that, indexed to Google, Yahoo!'s click-through rates were up 5-10% since the Panama launch. The firm is increasing their 1Q revenue estimate by $15mn to $1,206mn (ML now in-line with consensus) as believe low-end of the 1Q guidance range seems less likely. CY07 adjusted EPS increases to $0.75 from $0.74 on higher revs. and a lower share count. Maintains Buy.

Notablecalls: Nice comments but not likely actionable.

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