Tuesday, January 23, 2007

Yahoo! We Have a Winner.... Well, Maybe

It didn't take long for investors to sniff out a buying opportunity. Just one day after shedding 88 points, the Dow tacked on 56.64, putting the Dow almost 70 full points into the green for 2007. Reverse logic prevailed upon traders once again, as rising oil prices (+2.46, 55.04) were attributed for much of the gain. Exxon-Mobil (XOM), the one oil stock on the Dow, busted out for a 1.59 gain. The oil biggie, along with Boeing (BA +1.76), Caterpillar (CAT +1.76) and United Technologies (UTX+2.05) were the only Dow components to record gains of more than a point, but it was more than enough to offset fractional losses in 12 of the 30 Dow stocks. UTX surged on their earnings announcement, reporting profits up 38% from a year ago.

Over on the tech-heavy NASDAQ - which gained less than a single point - a mid-day sell-off accounted for the tepid closing value. The index was up nearly 19 points, but gave almost all of it back as fidgety traders awaited earnings news from Yahoo.

The news from Yahoo was not surprising nor was it encouraging. The search-and-portal company reported earnings of .19, down from .46 a year ago. Excluding certain one-time charges, they came in at .16, ahead of analysts' putrid expectations of .13.

The big shave from last year's numbers were rather expected, though it didn't stop the sellers who knocked .46 off the share price during regular market hours prior to the announcement and had nipped another .74 in after-hours trade shortly after 5:00 Eastern. However, by 5:30, trading reversed course and the stock added 1.44 on news of encouraging reports from the rollout of its new ad platform, code-named Project Panama.

With the stock trading at 26-29 and change, and earnings for the full year 2006 of a mere 49 cents, Yahoo will be hoisting around a trailing p/e of 45-50, should the stock remain at or near current levels, and that looks dubious at best. Additionally, analysts were not impressed with Yahoo's outlook for the current quarter or all of 2007, both below expectations.

Noting these minimalist readings, CEO Terry Semel's head could (and should) be on the chopping block. His tenure has been marred by the emergence of Google taking over the top spot in search and a 30% drop in share price over the last 12 months. The company also has significant image problems, not the least of which being its age. As one of the internet pioneers, the company, as a public entity, recently turned 10, regarded as ancient among internet users.

Without a little more pep in its step, regardless of how the after-hours trade shakes out, Yahoo may continue to be among the net stocks' laggards for the near term.

Next up: eBay

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