Yahoo: Online for Bigger Things


Yahoo: Online for Bigger Things

The search engine, news and entertainment site and advertising medium reports strong quarterly cash flow and advertiser interest. In an upbeat exchange with analysts, its executive officers say to watch for new developments.

Shouts of "yahoo!" reverberated across America on Tuesday as the stock market cheered signs that the Federal Reserve's long campaign of interest rate boosts might be nearing its end. Stocks soared and recovered two weeks' worth of losses in one trading session. It remains to be seen whether the rate hikes really are over and whether that means a revival of the bull market.

But for Yahoo the Internet company, Tuesday should be the start of more than a one-day pop. The stock (symbol YHOO) advanced from $31 to $33 on analysts' enthusiasm over its first-quarter results but also on optimism about new products and services for users and advertisers, both in the U.S. and in foreign markets.

Shares of the world's largest search-engine company have been up and down for several years, including a fall from a high of $43 earlier this year. The drop occurred despite positive trends in Yahoo's business. Executives, led by CEO Terry Semel, have a long list of charts showing big growth in games, music, photographic services and other paid content. The number of paying Yahoo subscribers is up 49% in one year, to 13.3 million. All those people do not necessarily spend lavishly on the site -- maybe only $5 a month -- but the company says this trend is in its early stages. As for advertising, Yahoo is expecting a bump later this year when it rolls out a new search platform. Yahoo plans to release more details at a meeting in May with analysts and large investors.

Analysts reacted enthusiastically to Yahoo's first-quarter results, with leaps in cash flow, paid user traffic and advertising volume, plus upbeat guidance for the rest of the year. A canvass of a half-dozen research comments finds analysts generally expecting Yahoo shares to reach $40 to $45 by year end. That's not the kind of explosive performance that would put Yahoo's stock in the same league as rival Google's, but it would represent gains that should put a smile on the face of any Yahoo shareholder.

--Jeffrey R. Kosnett