Wednesday, October 21, 2009
The Least Helpful Call You Will See Today
The least helpful call you will see today—and there are a number of contestants for that honor, not the least being Leerink Swann’s reduction in price target for fallen angel Boston Scientific from $15 a share to $12 a share now that the stock has already collapsed (last trade, $8.57)—must be the following bit of Analyst-Speak from the research team at Deutsche Bank.
It concerns Yahoo!, about whose business prospects we here at NotMakingThisUp express no opinion at all—although we will point out that CEO Carol Bartz may be to technology management what Warren Buffett is to investing.
That is, she’s very, very good.
And the stock market appears to have already recognized this, for it has rewarded Yahoo! shareholders with a 45% gain year-to-date. Whatever Bartz is doing at Yahoo!, its shareholders clearly want her to keep doing it.
Not so the analyst at Deutsche Bank, who continues to bravely fight the rising tide.
And if any readers can figure out precisely what the analyst is trying to say in today’s commentary—aside from the fairly obvious fact that his “Hold” rating has been too timid (“Hold” being the Wall Street equivalent of “We Don’t Like This Stock”), but, in the proud tradition of Wall Street’s Finest, at least since we were part of that club nearly 30 years ago, he can’t bear to throw in the towel just yet—please let us know.
We re-print the note as it appeared in our inbox this morning:
Yahoo! (YHOO.OQ),USD17.17 Hold Price Target USD16.00 - Jeetil Patel. Tgt $15 to $16. We maintain our HOLD investment rating on shares of Yahoo!, as we believe the co's. removal of lower-quality ads and re-investment back into engineering and products is the right long-term approach to growth. However, these changes have been slow in implementation (evidenced by 3Q EBITDA upside on lower opex), thereby placing Yahoo! in a longer transition (into 1H 2010) than expected while the online ad market is growing.
Hold - As expected, Yahoo! beat 3Q EBITDA due to lower R&D, ad spending while revs almost hit the mark on affiliate revs, forex gains (Q/Q) and fewer cutbacks in low quality ads. While there are signs of ad stabilization at Yahoo!, any improvement was difficult to detect after adjusting for these helpful items. More importantly, this is a business that clearly needs fixing, but our sense is that management is not moving as aggressively as hoped to overall [sic; suggest ‘overhaul’ was meant] the business when there are revs and profits at risk. Investors may be getting excited about playing the online ad recovery, but a stalled fix/re-investment may push Yahoo!’s recovery out until 2Q 2010 at the earliest (even though online ad growth may be turning shortly).
For the record, we count seven qualifiers in just two paragraphs: one “however,” one “while,” one “more importantly,” two “buts,” one “even though” and a “may be.”
(It reminds us of the old Woody Allen line: “I’d like to leave you on a positive note, but I can’t. Would you take two negatives?”)
Furthermore, we can’t fathom how Yahoo! could “beat” the 3Q EBITDA number “as expected.”
Thus, for having elevated double-speak into triple-speak and possibly quadruple-speak, we nominate today’s Yahoo! comment from Deutsche Bank as the Least Helpful Call You Will See Today.
I Am Not Making This Up
© 2009 NotMakingThisUp, LLC
The content contained in this blog represents only the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 9:41 AM