Yahoo! (NASDAQ:YHOO) is set to report its first quarter results on April 15. While the company’s stock has performed exceedingly well at the markets over the past two years, its revenues have failed to gain traction despite numerous website and product refreshes from the current management. In Q4 2013, the company posted a 2% year-on-year decline in net revenues (excluding Traffic Acquisition Cost or TAC) to $1.2 billion. Furthermore, the non-GAAP operating income declined by 8% to $174 million and non-GAAP net income increased by 17% to $482 million during the quarter. 
In this earnings announcement, we continue to closely monitor the search and display ads revenue divisions. Furthermore, we expect that its associate companies will continue to report strong growth, which will buoy its bottom line.
Outlook For First Quarter And Full Year 2014
For the first quarter, Yahoo expects revenues (ex-TAC) to be in $1.06-$1.10 billion range. Additionally, it expects adjusted EBITDA to be between $290 million and $330 million, and non-GAAP operating income to be between $130 million and $170 million. While the company has refrained from giving any guidance for 2014, it will continue to invest and expects the momentum to pick up in latter half of this year.
Mobile Audience In Focus Once More
Yahoo’s display ads and search ads divisions make up 12.4% and 14.2% of its value, respectively, according to our estimates. Both these divisions have witnessed a decline in revenues. Yahoo is addressing this decline by focusing on developing and delivering content on its mobile platform. Yahoo’s mobile platform hit approximately 400 million unique visitors in Q4 2013. This growth was instrumental in increasing its page views as the increase in web traffic translates to more consumption of content across Yahoo properties. In the upcoming earnings announcement, we will be closely monitoring the growth in unique mobile visitors, which will thereby improve revenues from its display ads business. Additionally, we want to know what impact the growth in search on mobile devices will have on Yahoo’s revenue per search (RPS).
After Mobile, Is it Time For Videos?
Ever since Marissa Mayer, the CEO of Yahoo, took over the company, she has been advocating development of a mobile platform to counter the decline in revenues from display ads and search ads divisions. However, recent news suggests that the management has intensified its efforts to build a repository of original video programming that typically are shown on high end cable-Tv network and streaming services such as Netflix.  Furthermore, the company has been hot on the heels of a video hosting website, and plans to compete against YouTube by launching a next-generation video website in the next few months. In this earnings announcement, we want to know the progress the company has made in this direction and its strategy to leverage its core web properties to monetize its video offerings.
Associate Companies To Boost Bottom line
The primary reason for Yahoo’s rich valuation is its investment in high growth businesses, Alibaba and Yahoo! Japan in Asia. Alibaba generated $1.7 billion in revenues, $856 million in operating income and $717 million in net income during Q2 2013. On the other hand, Yahoo! Japan generated $920 million (JPY 95 billon) in revenues and $480 million (JPY 49.23 billion) in operating income in Q3. We expect this trend to continue in the upcoming quarterly results. We believe that this will positively impact Yahoo’s bottom line and will buoy its overall results.
We currently have a $34.55 price estimate for Yahoo!, which is in line with the current market price.Notes: