Although not entirely unexpected, Yahoo’s (NASDAQ:YHOO) Q3 2011 earnings results reflected the struggle the company is facing in the online advertising market, [1] with the search alliance with Microsoft (NASDAQ:MSFT) producing weak results at best. What’s even more worrying is that Yahoo’s net display advertising revenues stayed flat for Q3 after showing some signs of improvement in Q2. It seems that despite Yahoo’s attempts to forge new partnerships to develop content, the company is still not being able to monetize its traffic as well as Google (NASDAQ:GOOG) or Facebook.
We have a revised price estimate of $17 for Yahoo’s stock, which is about 10% above the current market price. The revision has been made based on our changes to revenue forecasts, as well as a change in the company’s net cash/debt position.
Content Not Helping Yahoo Much
Despite entering into various content-sharing partnerships, Yahoo’s display ad division has not managed to make a significant dent for Q3 2011. This is primarily attributable to Yahoo’s inability to engage its users, and we expect this to translate into declining average page views for every user on Yahoo! Sites. While Yahoo is still trying to expand its content through partnerships such as the one with ABC, we do not expect it to lead to any turnarounds for the company in the near future. Additionally, the relatively expected nature of Yahoo’s Q3 2011 results should not take off any steam from the prospect of Yahoo’s sale, which is still in its initial stages as bidders express their interest.
See our full analysis for Yahoo’s stock here.
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