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.

Jeff Matthews
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.


Mark said...

While it may make for a catchy headline, tagging the Leerink analyst's note today on BSX as a "Least Helpful Call" is a bit of a misnomer. Actually, his "Least Helpful Call" may have been his last one (or several). No one yet knows how "helpful" (or "unhelpful") his latest one is.

Anonymous said...


Speaking of Carol Bartz, here's a nice interview of her management style in the 10/17/2009 NYT Corner Office series for other readers to peruse...enjoy!

Anonymous said...

Comparing Carol Bartz to Warren Buffet is a stretch. She was at Autodesk for 15 years. For the first 10 years of her tenure, the company limped along, while she feasted on option. She was swept up in the bubble spending on infrastructure and rode the wave. Most overrated CEO ever.

Jeff Matthews said...

Well, so long as they're not in Yahoo Message-Board style, we post all comments.

And that last is a whopper. Bartz turned Autodesk from a one-hit wonder into an important technology company.

In the process, she made the shareholders rich, and she got paid for it.

That's how it's supposed to work.


Jack Straw said...

Jeff - another way to look at it would be that this analyst actually has the guts to make some negative comments when everyone seems to love the stock. In the past, even within this column, you have criticized analysts for just going with the crowd. This guy is certainly not doing that. I read every one of your posts, and I'm not sure how an analyst could really win with you. Isnt this guy doing a good job of expressing his opinion (albeit with a ton of qualifier, analyst-speak type words), which happens to be contrary with what the stock is doing?

I have no clue about the merits of Yahoo's stock price and would not be able to express an opinion on it. You say you offer no opinion on it, although by comparing Carol Bartz in her field to Warren Buffett in his, a "discerning" reader could probably glean you have more positive thoughts on her effect on the business then negative thoughts, no?