Wow, that was a drop. The market is a total heart breaker sometimes. Let me be the first to tell you that it was a punch in the midsection to watch my nest egg at 32 be decimated 4 bucks the next morning. My stop automatically kicked in at 28 for a tiny gain... I <3 the market (Yes, I'm being sarcastic). There really was nothing I could have done about it. It opened at $28 and I can't always be around for after hours. Meh... Shit happens.
Now the reason I didn't write about this earlier is because I wanted to wait for Google to report earnings so that I could get a better understanding of the Ad Word landscape. Also, since I do not have the money nor the balls to invest into a $500 dollar stock, this will strictly be about the Y!
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So let's look at the two. Yahoo! fell 11.8% to $28.31 on volume nearly triple the stock's full-day average. Quarterly profit dropped 11% on higher operating costs, as the No. 1 operator of Web sites by traffic spent heavily to better compete against rival Google Inc. Net income for the first quarter fell 11% to $142 million, or 10 cents a share, from $159.9 million, or 11 cents, earned in the year-earlier period. Analysts had, on average, expected a profit of 11 cents a share, according to a Thomson Financial survey. Sales rose 7% to $1.67 billion on stronger demand for the company's online display advertisements and a surge in sales of text-only search ads late in quarter. OK, not too bad. A penny shy on inflated expectations that Yahoo!'s new ad word engine would come through early.
Google reported revenues of $3.66 billion for the quarter ended March 31, 2007, an increase of 63% compared to the first quarter of 2006 and an increase of 14% compared to the fourth quarter of 2006. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs, or TAC. In the first quarter of 2007, TAC totaled $1.13 billion, or 31% of advertising revenues. In other words... Google ... Crushed... Yahoo!
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So here's my take on things. Yahoo! execs already told us to set our expectations with their new ad word platform, Panama, and told us not to expect anything to happen until Q3 of 2007. I think with any launch, it takes time to gain traction. On the buyer side, I think they need to see how well the new product performs and on Yahoo!'s side there will be a ton of adjustments made along the way. I think the turkey is still in the oven. So the big question is, will YHOO hit 25 first or rebound back to 32?
This is where Google steps in. I think the overwhelming mentality is that YHOO just can't compete. Just as investors were falling in love with the Big Purple again, Google reminds you why you settled down with it in the first place with yet another "I'm still the hot, sexy mama that locked down your candy ass" quarter. That combined with the usual weak Q2 and Q3 for internet companies will make me lean towards betting that the stock hits $25 (maybe lower) first.
And yes, for those of your who are wondering. If I had the 7 figure account, I would have definitely bought Google at $435.
Notes:
In Portfolio: Just got out... time to watch.
Investing Mindset: F-Large Caps... Go Smallies
NBA Playoff Hopes: I'm shouting "GO ROCKETS!" and I'm whispering "go lakers" ;)
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I want to quote your post in my blog. It can?
And you et an account on Twitter?
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