Posted by TAP TAP could be wrong on this call but only if brokerages are going to inflate YHOO share price higher and ignore the writting on the wall. I do not see how it can possibly survive tax loss selling pressure which is soon to hit many stocks as many paid $19 to $43 for YHOO during 2001. The short position on YHOO according to Yahoo's own stock profile is about 44 mil shares (14.2% of float) as of 9/10. TAP likes Yahoo and uses it often however it seems inevitable that the stock price will dwindle due to present outlook, evaluation and economy.
on 10/15/2001, 1:21 pm
Hello TAP members....TAP has been very inactive as of late due to shakey market and tragic events of 9/11 and is still reluctant to be long in this market with not only recession woes and tax selling around the corner but the lingering threat of more terrorist attacks. The last internet stock to watch TAP picked back on 1/18 was EBAY which happens to be about the only internet stock that is not subject to current advertising slow down and is currently higher @ $61.35 up from the $48 price on 1/18. That brings us to YHOO that unlike EBAY derives 80% of its revenue from advertising and tho it spiked up a bit on recent earnings TAP believes at this time it might be a good short trade and believes the current price bounce will slowly retrace to recent lows of $8 and dwindle even lower due to tax selling late Nov into Dec at which time TAP will consider going long for another January bounce as YHOO did last year following major tax selling. A close look at YHOO chart will show that the stock declied over 60% from Oct to Dec and then bounced from mid 20's to $43 in Jan then dwindled down to current levels. YHOO is alot lower than it was this time around but the valuations are still high goin forward and many paid much more for YHOO this year so there will be tax losses to lock in . YHOO is charging for some of their services now trying to diversiy its revenue stream away from being totally dependant on advertising but it is TAP's opinion as well as others that it still wont see daylight for perhaps another year or so despite being the biggest portal on the internet. Revenues for 3rd qrt were down 43.7% and tho YHOO reported .01 a share gain pro-forma the actual loss was .04 per share. I find it hard to believe had YHOO gained 17 mil on investments instead of losing 17 mil that they would of excluded it from the EPS. Tho they may not lose 17 mil again...they are invested and could lose again next qrt. YHOO so far has not become an ISP which will make it very hard for them to compete with AOL, AT&T & MSFT who is gaining ground fast....the longer they wait the longer it will take them to recover. The days of "new economy " are over and YHOO along with many other dot.com companies that were priced @ $100's...$200's as high as $400 are now low double if not single digits or bankrupt altogether. The "New Economy" sales pitch we found out was just Wall Streets way of making Millions on investors who entrusted their money to them. Sure those in early made a bundle but many late to the party were left holding the bag because of irresponsible price targets given by anaylst who were selling same stocks with both hands....how many of those companies could become the next Microsoft afterall, which they would of had to do to support forward PE's in the 1000's. That said YHOO even though down so much from highs is still way overvalued going foward as they did revise downward for 4th qrt as well and advertising on internet isnt expected to rebound till sometime mid 2002 if that soon. Look at what The Street.com editor evaluations and comments were on YHOO.....As Yahoo!'s financial fundamentals have deteriorated amid a sharp slowdown in ad spending, investors have clung to impressive audience and traffic numbers reported by the Web behemoth. But it's getting hard to find much solace even in these figures, judging by Yahoo!'s third-quarter earnings release.
Once again, Yahoo!'s core operations made a loss, even when using the company's pro forma numbers, which exclude all manner of expenses. In the third quarter, it reported an operating loss of $10 million, compared with a $110 million profit in the year-ago period. Yahoo!'s "other income," which isn't derived from core operations, allowed it to report a small pro forma profit of $8 million, or 1 cent a share. Yahoo!'s stock may be down hugely from its highs, but it still trades at more than 250 times expected 2001 earnings. The bulls are saying that Yahoo! is in prime position to exploit a massive comeback in ad spending, which will cause earnings to double, even treble, over the next two years. Let's play along with that scenario for a moment. Analysts expect it to make 11 cents a share next year, giving it a recent P/E of 100 (the stock traded near $11 Wednesday), using that estimate. Seems expensive. But one could argue it's justified, seeing as earnings will be growing in excess of 100%. It'll be interesting to see how quickly analysts' 2002 estimates come down as a result of Yahoo! bringing down its fourth-quarter guidance. About a quarter of Yahoo!'s ad clients are dot-coms, some of which will be facing serious cash restraints even if the economy comes roaring back. Traditional companies are going to bargain much harder on ad rates in the next cycle. And Yahoo!, if its page views are indeed stagnating, isn't going to be in much of a position to exact the rates it's used to. That leaves revenue from individuals and businesses that Yahoo! can provide. Very little detail on those revenues Wednesday. This all means that Yahoo! shouldn't be trading at anything over 40 times 2002 earnings of, say, 8 cents. Oh dear, that's just over $3. Do you Yahoo!? Hope not.
DISCLAIMER
TAP has taken a short position in YHOO and is not paid in anyway from any company.
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