Thursday, April 05, 2007

Calls of Note Part 3

- Goldman Sachs is increasing their 2007 revenue and EBITDA estimates on Yahoo! (NASDAQ:YHOO) by 2% and 3% respectively as they now forecast 23% yoy growth in branded ads and 16% yoy growth in search versus prior 19% and 13% forecasts. Firm is also raising their price target to $35 from $31.50 but maintaining Neutral rating given 10% upside versus the 20%-plus average upside of firm's Buy-rated stocks. New estimates still reflect a benefit from Panama but now the impact begins in 1Q2007 as they think Yahoo! has benefited from better-than-expected query growth and greater click-through rates that have more than offset declining prices.

Notably, even with their higher 1Q2007E revenue, the 13.8% yoy growth is still sub-par to other large-cap Internet names at 25%-55% and requires acceleration to 24% growth by 4Q2007 to achieve 18% full year growth and 16% growth from 2008-2011E.

Firm's new 12-month $35 price target assumes a 16X 2007E EBITDA multiple (1.0X forward 3-year growth) plus ~$9/share for Yahoo!'s cash, NOL, and investments in Alibaba, Yahoo! Japan, and Gmarket.

Notablecalls: Not actionable but good to know category. Note that Piper is out raising their ests on eBay (NASDAQ:EBAY) this AM. But that's hardly a surprise here.

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