Yahoo Inc.YHOO

Morningstar Rating

Stock Research and Analysis

by Larry Witt, CFA

Yahoo remains one of the most heavily trafficked sites in the world. However, despite secular tail winds for online advertising, we think industry dynamics (search market share, audience fragmentation, and pricing power) will prevent Yahoo from achieving Read more

Bulls Say

The market for online advertising is taking share from traditional media as large advertisers are increasingly attracted by its measurability and its high returns on investment.

Yahoo is focused on becoming a larger seller of ads on third-party sites. This will provide the company with much-needed diversification.

Yahoo is becoming a portal for advertisers, as its new advertising platform will give advertisers access to its plethora of offerings including paid search, display ads all over the Internet, and mobile advertising.

Yahoo has several properties, like its Web mail and stock portfolios, with relatively high customer switching costs, keeping users tied to the firm.

Yahoo has loads of cash for stock buybacks, acquisitions of hot technology, or investment in new content for its Web sites. Read more

Bears Say

Delays in its new advertising platform and a lack of high-profile acquisitions have led many to perceive Yahoo as a lethargic player in a dynamic industry. This could make it difficult to attract and retain users, advertisers, and employees.

Yahoo faces increased competition for user attention from traditional media companies and trendy sites, including Facebook and YouTube.

The company faces stiff competition from AOL TWX, Google, and MSN, all of which are building similar advertising platforms.

A big chunk of Yahoo's revenue comes from search, a business with almost no switching costs. In addition, Yahoo has clearly fallen behind Google in search technology and users.

With the majority of its revenue tied to online advertising, Yahoo's financial performance will fluctuate significantly in an economic recession. Read more

Strategy

Yahoo invests heavily in content and technology to attract as many users as possible. It can also deliver a large audience to advertisers through partnerships with third-party sites, its ownership of Read more

Management

CEO Carol Bartz joined Yahoo in January 2009 after Jerry Yang's unsuccessful attempt to turn around the company he co-founded. Yang's knowledge of technology and the Internet are obvious, but his lack of executive management experience was too much Read more

Profile

With operations in nearly 40 countries, Yahoo is one of the most popular Internet destinations in the world. Yahoo offers its users numerous free services, including search, Read more

First Name

Last Name

Email Address

Zip Code

Create Password

Verify Password

(6-15 characters; case sensitive)

What is your occupation or job title?

Select...

Your registration indicates agreement to the terms of use.

Week Ahead Market Report: 1/25/2010
Watch more