Thursday, April 06, 2006

Yahoo! was a sell at $42!

Of course that is easy to say now, when they are trading at $33, but back in November 2005 I said that Yahoo! was too expensive at $42 in November and was heading fast towards 30%-40% in yearly EBITDA growth (remember that Google has an EBITDA growth of 115% yearly).

When their Q4 came out they hit exactly 40% in yearly EBITDA growth, my guess is that when their Q1 comes out the 18th of April their yearly EBITDA growth will lie some where between 30% and 35% - probably closer to 30%. The money is in search advertising for very good reasons (that's were the buyers for advertisers products are) and Yahoo! is continuously loosing share to Google.

Personally I would not be buying Yahoo! above $26 (EBITDA P/E = 20). They are simply loosing to much ground to Google plus they have officially conceded their efforts in search. Their target is now to hold on to their market share, but even that seems too optimistic. When their growth soon will be 30% yearly on EBITDA and might even move lower - why pay a high P/E?

One thing that could work a little positive for Yahoo! is their new project to include text ads clickrate in their ranking. Instead of now where it is only how much an advertiser will pay per click. This will improve the revenue from their search listings. It should be rolled out at the end of 2006 - beginning of 2007. I have always wondered why they did not copy this clever thing from Google immediately, but maybe Yahoo! has been sleeping for too long.

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