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17.32 + 0.09
49.99 - 0.16
4/5/04 4:01:00 PM ET

REUTERS
Yahoo ad sales, outlook take earnings spotlight
Reuters, 04.05.04, 9:06 PM ET


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By Lisa Baertlein

SAN FRANCISCO, April 5 (Reuters) - When Yahoo Inc. (nasdaq: YHOO - news - people) reports quarterly earnings this Wednesday, investors from Wall Street to Main Street will be eyeing the Internet company's advertising sales and earnings outlook for signs its stock is not overpriced.

Following a predictable pattern of running up ahead of earnings, Yahoo shares finished Monday's Nasdaq session at $49.99, after hitting a new one-year high of $50.99 during the session.

Yahoo investors "buy on the mystery, sell on the history," said American Technology Research analyst Mark Mahaney.

The company's stock chart looks like a jagged saw blade with uptrends fueled by expectations of good financial results and downdrafts driven by anything other than booming growth.

While some investors are sitting on the sidelines due to Yahoo's rich, $33.3 billion valuation -- which makes it almost half the size of media giant Time Warner Inc. (nyse: TWX - news - people) on paper -- the Internet bellwether's post-bubble resurgence is difficult to ignore.

For the Yahoo's first quarter ending in March, analysts are predicting strong results propelled by a revival in traditional online advertising and continued strength in Web-search ads.

Piper Jaffray analyst Safa Rashtchy on Monday boosted his forecast for year-over-year advertising growth to 25 percent from 20 percent and raised his revenue and earnings targets.

He took his net income estimate up 1 cent to 11 cents a share and raised revenues to $511.5 million from $505 million.

Analysts polled by Reuters Research see Yahoo posting first-quarter earnings of 11 cents a share on revenue, excluding traffic acquisition costs, of $484.68 million.

Traffic acquisition costs are advertising revenues that Yahoo shares with its distribution partners.

Fulcrum Global Partners analyst Imran Khan added that Yahoo's traffic and key-word advertising prices are on the rise, bolstering advertising revenues.

The improving job market, too, could be setting the stage for better-than-expected results at Yahoo's HotJobs unit.

Mahaney said he'll be watching for any changes to Yahoo's previously stated goal of signing up 7 million to 7.5 million fee-paying subscribers in 2004, following Web search service Google Inc.'s splashy announcement last week that it plans to offer a competing free e-mail service called Gmail.

For the second quarter, Yahoo is forecasting earnings of 12 cents a share and revenue, excluding traffic acquisition costs, of $534.05 million.

In order for shares to continue rising following earnings, Yahoo will have to post results and guidance that substantially exceed street expectations, analysts said.

Copyright 2004, Reuters News Service





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