Yahoo Japan Pre-Earnings: Expecting Growth In Mobile Ad, E-Commerce Revenue

+29.36%
Upside
5.03
Market
6.51
Trefis
YAHOY: Yahoo Japan Corp ADR logo
YAHOY
Yahoo Japan Corp ADR

Yahoo Japan Corporation (OTC:YAHOY) is set to announce its fiscal Q4 results on April 26. [1] (Fiscal years end with March.) As the company continues to expand its services and footprint in the Japanese e-commerce industry, and strengthen its position in the Japanese online ads industry, we believe that the company looks set to report another quarter of growth for its business. Furthermore, as the company continues to expand its services to the mobile domain, the company is expected to report growth in the revenue contribution from mobile devices across its verticals.

See our complete analysis of Yahoo! JAPAN here

Mobile To Boost Revenues Across Ads And E-Commerce Divisions

According to our estimates, mobile advertising contributes 48% to Yahoo Japan’s online advertising revenues and makes up 34% of our estimate for Yahoo Japan’s total value. In 2016, desktop online ads revenue declined as revenues from smartphones rose, nearly equaling revenues from desktops.

Relevant Articles
  1. Strong Revenue Growth Potential Presents A Sizable Upside For Yahoo! Japan
  2. How Is PayPay’s Growth Likely To Impact Yahoo! Japan Post Q3?
  3. What To Expect From Yahoo! Japan’s Q3 Earnings
  4. How Can The Launch Of PayPay Impact Yahoo! Japan’s Valuation?
  5. Yahoo! Japan Earnings Preview: Media & Commerce Likely To Drive Top Line Growth
  6. Key Takeaways From Yahoo Japan’s Earnings, And Expectations For Fiscal 2018

According to the company, monthly mobile page views from smartphones stood at 39,261 in Q4 CY2016.  This translates into nearly 60% of total monthly page views. We estimate that the annual page views from mobile were at 473 billion in 2016. Given the propensity of users to check out web content on smartphones, we believe that advertising revenues from mobile will increase in fiscal Q4. Furthermore, as advertisers are earmarking more funds for mobile ads, we expect revenues from mobile devices to drive revenue growth for Yahoo! Japan, which leads the Japanese internet market in terms of traffic.

According to advertising firm Criteo, Japan leads the world when it comes to mobile commerce transaction volume, due to the fact that many Japanese consumers prefer to use mobile devices for purchases. [2] For Q4, we expect that e-commerce transaction value through smartphones grew once again.

Transaction Revenues Across Shopping And Auction Sites To Grow

According to our estimates, Yahoo Japan’s eCommerce business is the second biggest contributor to its value at around 13%. The division generated total revenues of approximately $4.24 billion in 2016, and we expect total revenues from this division to increase slowly to around $4.65 billion by the end of our forecast period.

Yahoo! Japan’s online shopping division continues to lag due to intense competition from incumbents such as Amazon and Rakuten that list more products on their sites. The company has responded well to these challenges and implemented numerous changes that have helped strengthen its position in the e-commerce business. In 2016, the total transaction value across shopping, auction and listings also grew by 2% year over year to $21.8 billion. Additionally, its performance metrics, the number of monthly active shopping IDs grew by 28.5% to 481,621.

We believe that this trend continued in Q4 and the company will continue to report an improvement in its performance metrics. In this earnings announcement, we will be closely following the transaction value for both the listing and auction properties of Yahoo Japan to gauge how these divisions have done vis-a-vis the Japanese e-commerce industry.

Digital Transaction Services Are Gaining Traction

Yahoo Japan entered the digital wallet business in 2013 and the credit card business in 2015. Since the launch, revenues for this vertical have grown from $80 million to over $334 million in 2016. The company has formed partnerships with players such as Softbank to promote its digital payment services, which includes credit card and digital wallet services.

As a result, over the past few quarter, the credit card transaction value for the company has seen strong growth. In fiscal Q3, the company reported that the transaction value for the credit card business grew by 150% year over year, while the number of credit cardholders grew by 88% to 3.41 million. We expect the company to sustain this trend in Q4.

At present, we have a $9.28 price estimate for Yahoo! Japan, which is inline with the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

 

Notes:
  1. Investor Meeting, Yahoo! Japan []
  2. With close to 55%, Japan has highest number of mobile commerce transactions in Q2 2016, October 28 2016 []