All Right, Time To Place Those Yahoo and Google Bets

Finally, the moment(s) of truth... 

Were Yahoo!'s troubles a false alarm?  Were Yahoo!'s troubles a real alarm but just Yahoo!-specific?  Were Yahoo!'s troubles a canary in the coalmine that will soon spell temporary doom for Google, AOL, and the rest of the industry (MSN was doomed years ago, perhaps permanently).  Was the recent decision by YouTube and Sequoia to take all stock on the buyout deal an insider indication that Google's revenue is still steaming along?  Can Google finally bust out of its trading range and set a new high?  Or will Google's slowing growth and soaring capital expenditures finally cause investors to decide that a free-cash-flow multiple over 50x is exorbitant--and reduce it to, say, 30x? 

Ladies and gentlemen, time to place your bets!

Yahoo: A few weeks ago, Yahoo announced that revenue in the financial services and automotive sectors had weakened and that Q3 revenue was now expected to at the low end of the $1.115 to $1.225 billion guidance range.  Was this a head fake?  Will Yahoo now announce that the quarter finished strong--blowing out the new consensus, maintaining future guidance, and blowing up all who are short the stock?  Or is the $1.115 expectation the right one and will Yahoo reduce future guidance.  According to Safa Rashtchy, the Street consensus is $1.15B, although my sense is that the real expectation is less than that.

My prediction: $1.14B and reduced future guidance, already walloped stock stays put.  (I own the thing, so I sure hope so).

Google: When Yahoo announced its woes, Google stumbled, too--sensibly, I thought (I'm in the canary in the coalmine camp).  But then Cramer came out banging the drum, the YouTube afterburners fired, and, suddenly, two insiders in the know--Sequoia and YouTube management--announced that they were taking all stock on the deal (something they presumably wouldn't do had they been tipped off that Q3 or Q4 was looking weak).  So if the industry fundamentals are, in fact, crumbling, it seems that they may not be affecting Google--yet.  Per Safa, the consensus net revenue estimate is $1.81 billion, up 9% sequentially.  (Safa's own "estimate" is $1.64, but he's still a bull, so one suspects that his real estimate is higher than that).

My prediction: Very modest upside--say, $1.83 billion--plus some vague but cautious remarks that will scare the bejesus out of people.  No new high and stock soon back to $400.  Lower if there's any sign of fundamental deterioration.

The Stakes:  Full credit to the IO reader whose predictions are most accurate, both quantitatively and qualitatively (in the past, it's been all quantitative).  Plus, as a special bonus, articulate arguments will be featured in posts ahead of time.

Comments

[Gootube]

I beat the King Troll?

[Ryan]

Second, sorry Troll.

[TheShadow]

$1.75B

Stock Opens Friday at $404

[Carling]

Yahoo 1.13 , $23
Google 1.84, 450 open from upbeat comments;

Yahoo is not a canary for Google. Spend on display advertising is fixed according to big company's allocated ad budgets for that year. Therefore as inventory increases with the growth of Myspace, facebook and Youtube - spend gets diluted between more sites and so Yahoo loses.

Spend on search (Google) is ROI based as long as the ROI is positive you will increase your ad budget.

Yahoo's problems are based on losing query share and display fragmenting - Google will be fine

[Still Inside]

GOOG's quarter? Haven't the foggiest. To me, the arguments up and down cancel each other. So they are a crap shoot as usual.

I don't get the YouTube/Sequoia thing though. That doesn't tell us anything.

Sequoia and the founders were told, "You are getting $1.6B for your company; our stock might go down, so it might only be $1.2B".

The alternative is waiting for another deal (from some other planet maybe), and if GOOG goes down, chances are any other company that would be buying them would be in the same boat. Old pros like the Sequoia guys know that if you have a deal like this at a time like this, you take it. In other words, GOOG had the upper hand in this deal, so they did what was most comfortable, which was all-stock.

So let's turn it around: that GOOG would want to spend stock on the deal instead of cash would indicate that the GOOG management is actually BEARISH on their stock price. Hmmm.

SI

[Victor]

Nice way to say nothing SI. I'll actually step up to the plate and make a prediction:

1.86, price will be around $450. It won't be a big beat, but expectations are already inflated, so i think 1.86 will be a great number for the business.

[Victor]

As for commentary, I've said much of this before: google continues to take market share, advertising execs are still trying to increase their budgets and there's a lot more room for internet advertising to expand for at least 2 to 3 more years. The canary in the coal-mine camp has cried wolf far too many times (sorry to mix metaphors). How big could internet advertising become? It still only represents a tiny fraction of total media advertising, yet the amount of time people spend on the internet has ballooned. It's only when the fraction of advertising dedicated to the internet roughly matches the fraction of time people spend using it that there will be an appreciable slow-down in growth rates. We're still a long way from that, even in the US of A.

[LC]

Revenue: 1.86
Earnings: 2.7
460 open

[sufiy]

Net revenue 1.644
Earnings 2.22 GAAP
Stock 400 open

http://photos1.blogger.com/blogger/2373/2953/1600/scan0012.0.jpg

http://sufiy.blogspot.com/

[Ryan]

1.92 Billion
438

[David Neubert]

YHOO
1.13b
Stock opens down closes unchanged.

A question: Is the internet advertising market still learning about seasonality of revenues or are seasonal effects well known and adjusted for in numbers?

[Victor]

Yahoo's numbers are in:

http://biz.yahoo.com/bw/061017/20061017006238.html?.v=1

[Victor]

Henry, you were on the money viz Yahoo, definitely at the low end:

"Revenues excluding traffic acquisition costs ("TAC") were $1,121 million for the third quarter of 2006, a 20 percent increase compared to $932 million for the same period of 2005."

[john]

Sufie: Stop spamming your piece of shit blog site all over the internet. Everywhere I go I see this. Learn how to make professional charts without chicken scratch if you are going to continue this. I also think you are a moron and generally wrong, so I am going to say goog breaks out of its triangle formation for good with a gap up due to major revenue increases from the quality score changes. 452 open.

[Dr duncan]

UNSECURED PERSONAL LOAN
$100,000to $1500,000
and above
Apply for a Loan from $100,000to $1500,000 with no collateral required and receive a no obligation loan approval

We welcome the opportunity to show you how effective we are at helping our clients obtain the money they need to succeed. Our professional staff is available for a Free Consultation.
At America One Funding, we understand that unexpected events arise requiring extra money that may not be readily available to you.

An Unsecured Personal Loan can provide excellent relief for any purpose, including vacations, debt consolidation, home improvements, tuition, car repair, or even to start a new business.
$1,000 to $9,999
Apply for a Loan from $1,000 to $9,999, with no collateral required and receive a no obligation loan approval.
$10,000 to $150,000
Apply for a Loan from $10,000 to $150,000, with no collateral required and receive a no obligation loan approval
to get started on contacting this loan please contact the casial today
Mr. Ben lee chin wong
CMD loan update

E-mail: swift_loans@yahoo.com

and let this little moment change your entire live.
We're on YOUR Side!sm