Here’s What Investors Want To Hear From Marissa Mayer
Estimize | Oct 21, 2014 12:06PM ET
Yahoo! Inc (NASDAQ:YHOO) is scheduled to report earnings for its third quarter of 2014 after the market closes on Tuesday, October 21. Analysts on Estimize expect Yahoo’s earnings to fall by 1 cent compared to last year but will also be eager to hear an update from CEO Marissa Mayer on her strategy to kickstart Yahoo’s stagnant revenue.
Yahoo’s stake in Alibaba (NYSE:BABA) has kept the company’s stock price afloat while its core media and advertising business has floundered. Now that Alibaba has debuted as a public company, investors no longer need to buy shares of Yahoo to gain exposure to Alibaba. Activist investors including Starboard Capital have already begun mounting pressure on Marissa Mayer to make drastic changes that suit their liking. The situation is particularly intriguing because Yahoo is sitting on north of $8 billion in cash.
When Alibaba had its IPO Yahoo was forced to sell a portion of its shares of the Chinese e-commerce mega company. In the months leading up to the public offering Mayer negotiated that number down, but still had to sell about $6 billion worth of stock. Ms. Mayer has already promised to return half of the value of its IPO sale to investors, likely through a share buy back or special dividend.
If management stays true to its word, that would leave Mayer with up to $5 billion to spend. On crowdsourced mergers and acquisitions predictions platform, Mergerize, there are 36 predictions about different scenarios that could play out for Yahoo. Some of those predictions reflect the views of a few activist investors who have called for Yahoo to sell itself to Alibaba or Japanese tech company Softbank (TOKYO:9984). Other predictions include Yahoo becoming the buyer by going after a large aggressive acquisition target like AOL (NYSE:AOL), Yelp (NYSE:YELP) -- although probably out of their price range now -- or TubeMogul (NASDAQ:TUBE).
Whatever new information Mayer reveals about her turnaround plans will probably be the most exciting piece of this afternoon’s announcement. Shareholders will also be looking for clarity on how she plans on returning value from the Alibaba stock sale to them.
Analysts on Estimize are expecting a dull quarter where earnings dip a penny from 34 cents per share in the same quarter of last year to 33 cents while revenues decline 2%. Even still those expectations are higher than the Wall Street consensus which is looking for only 31 cents in earnings per share and $10 million less in revenue.
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