Mayer may revive Yahoo?

This article will discuss Yahoo's first-quarter results and analyze whether it is a good time to buy Yahoo stocks.

In the first quarter, Yahoo’s revenue increased by 1% to 1.09 billion U.S. dollars, which was higher than the analyst’s forecast of 1.08 billion U.S. dollars. Among them, display advertising revenue increased by 2% to US$409 million, accounting for 38% of Yahoo’s total revenue. This is also the first time that display advertising revenue has grown since the second quarter of 2012; search advertising revenue has increased by 9%, at Yahoo! The proportion of revenue increased from 38% a year ago to 41%. From a global perspective, Yahoo paid clicks increased by 6%, and click prices rose by 8%. In the same period last year, Yahoo! paid clicks increased by 17%, but paid-to-click prices fell by 4%. Yahoo displayed advertising sales growth of 7%, higher than the previous quarter and the same period of last year, but advertising prices fell 5%, a decrease of less than 7% in the previous quarter. Yahoo display advertising prices have fallen 5 consecutively.

In addition to its core business, the Alibaba shares held have boosted Yahoo’s first-quarter results and will continue to drive Yahoo's growth in the future. Yahoo holds 24% of Alibaba shares. In the fourth quarter of last year, Alibaba’s revenue increased by approximately 66% and net profit increased by a factor of two.

Yahoo Japan's performance in the fourth quarter of last year was not good enough, revenue fell 14%, operating profit and net profit fell 20% and 11% respectively.

Yahoo operates in three major markets: the United States, the Asia Pacific region, Europe, Asia, and Africa. The United States is the only market for revenue growth, and Asia-Pacific and European, Asian and African revenues have declined.

The traffic acquisition costs of Yahoo's businesses are all decreasing. The acquisition cost of traffic decreased by 4% in search revenue, and decreased by 2% and 1% in display advertising and other businesses, respectively. The acquisition cost of traffic in Yahoo’s revenue dropped from 6% to 4%, indicating that the cost pressures on Yahoo’s profitability have been reduced. If this trend continues, it will be good for Yahoo's future profits and profitability.

According to Alibaba’s valuation of US$152 billion, Yahoo’s 24% stake is worth US$36.48 billion, or US$21.91 per share. Yahoo plans to sell about 40% of the stock when Alibaba is listed, and then may sell further other stocks.

Yahoo Japan is also working hard to expand its business. It has reached an acquisition agreement with mobile broadband operator eAccess. This transaction will become the platform for Yahoo Japan to expand its smartphone and tablet portal business. This helps Yahoo Japan expand its mobile advertising business.

Yahoo is considering adding more high-quality video programs. This year, global mobile advertising spending will grow from 13.1 billion U.S. dollars last year to 18 billion U.S. dollars this year, and will further increase to approximately 42 billion U.S. dollars in 2017. According to market research firm Gartner, display advertising will account for the majority of the mobile advertising market, and video advertising will grow fastest.

Yahoo currently has more than 430 million mobile subscribers, an increase of 30% year-on-year. Yahoo said that mobile users accounted for more than half of the total number of audiences, but the proportion of revenue is not so high, which is why Yahoo did not move revenue in the earnings report.

In contrast, Facebook has 945 million active mobile users per month, and mobile accounts for 53% of advertising revenue. This means that Yahoo needs to increase its revenue-generating capabilities in the mobile business. Adding more high-quality video content will lay the foundation for Yahoo to attract more advertisements.

If you rely solely on Alibaba, Yahoo will lose its momentum for future growth. Yahoo's core advertising business should show a growing trend, and continue to drive up the stock price after Alibaba's listing. Marissa Mayer, the chief executive, is revamping Yahoo's services and her efforts have begun to work.

In the past 15 months, Yahoo has repurchased $3.79 billion worth of stocks, including $450 million in the previous quarter. Yahoo’s free cash flow was reduced by 24% in the first quarter, which is not a good sign. Analysts recommend that investors hold stocks for a long time and do not increase Yahoo stocks until there is sufficient growth in revenue and profits.