Yahoo! Inc. (Nasdaq: YHOO) reported Q4 earnings after closing bell today (Tuesday), and Chief Executive Officer Marissa Mayer has done it again. Mayer has a perfect track record for beating estimates in every quarter since she took the reins in 2012.
Earnings per share came out to $0.46, shattering analysts' expectations of $0.38 by $0.08 per share. The digital media giant has beaten its per-share profit projections in each of the past eight quarters.
But the good news ends there.
Yahoo stock plunged sharply in after-hours trading today following earnings release, after closing at $38.22 per share. As of 4:30 pm EST, it's down 4.58% to $36.47 - and for good reason:
Under Mayer's leadership, Yahoo's core business has actually suffered declining revenue - today's report shows a 6% decline to $4.68 billion for all of 2013.
Moreover, Mayer's tenure has failed to boost Yahoo's share in its core business. Yahoo's display advertising business dropped 6%, according to today's report.
Mayer's strength is said to be in her ability to make quality acquisitions. Yahoo bought more companies in its year and a half with Mayer than the previous 10 years combined.
And today, Mayer insisted her approach will eventually pay off:
"I'm very pleased with our execution, especially as we've continued to invest in and strengthen our core business," Mayer said in the earnings release. "In Q3, we launched new user experiences across many of our digital daily habits - Yahoo Screen, My Yahoo, Fantasy Sports, and more. Now with more than 800 million monthly users on Yahoo - up 20 percent over the past 15 months - we're achieving meaningful increases in user engagement and traffic."
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As 2014 ticks on, YHOO stock investors should key in on the health and monetization of the acquisitions Yahoo is now leaning on to boost traffic and advertising.
In fact, the performance of this one company alone could make or break YHOO earnings moving forward...
The Key to Yahoo's Earnings - and YHOO Stock - in the Year Ahead
Yahoo's 24% stake in the Chinese e-commerce giant Alibaba Group Holding Ltd. could be responsible for more than 50% of Yahoo! stock value. Alibaba is estimated to be worth more than $14 billion, and growing rapidly, according to JP Morgan analyst Doug Anmuth.
The bottom line for the full year dropped in part because it was up against the year before, in which Yahoo benefitted from a 40% sell-off of Alibaba stock in Sept. 2012.
"GAAP net earnings for the full year of 2013 was $1,366 million, a 65% decrease compared to $3,945 million for the prior year (which included a net gain related to the sale of Alibaba Group shares of $2,755 million)."
On Nov. 11, 2013, Alibaba benefited as $5.7 billion was exchanged on its websites when Chinese shoppers celebrated "Singles' Day." The online consumers spent nearly four times more than U.S. shoppers shelled out on 2012's Cyber Monday ($1.46 billion).
In Q2 2013 - the last earnings period reported - Alibaba generated $1.7 billion in revenue, $856 million in operating income, and $717 million in net income.
Another big acquisition to watch is Yahoo's stake in Yahoo! Japan. The company is worth an increase of $7 per share to its American counterpart, according to Victor Anthony, managing director for Internet media at Topeka Capital markets, in an interview with The New York Times.
Yahoo! Japan generated $920 million in revenue and $480 million in operating income in Q3.
Finally, look for commentary on user growth and monetization for Internet blogging service Tumblr, which Yahoo acquired in a $1.1 billion acquisition in May 2013.
Acquiring Tumblr was supposed to help Yahoo reach a younger demographic. Additionally, it should help boost Yahoo's ability to implement more targeted ads (by way of providing data points like gender and location information).
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