All trading involves risk. Losses can exceed deposits.

Yahoo looking for better Q2 EPS

Fresh market updates from China’s Alibaba raise both optimism and questions.

All trading involves risk. Losses can exceed deposits.
Yahoo sign
Source: Bloomberg

Yahoo is expected to see its earnings per share increase year-on-year from 0.30 up to 0.38. This will be driven by stable sales of $1.085 billion but a weaker pre-tax profit of only $55.2 million.

Investors continue to focus on the company’s exposure to China’s Alibaba, rather than the day-to-day profitability of Yahoo. The company's 24% stake in Alibaba has exposed it to both the ying and yang of a pre-IPO company run by a ‘unique’ chairman in Jack Ma.

Alibaba is due to float on 8 August 2014 as the date is perceived to be lucky. In filings this week, the Chinese company has updated the markets as to where it feels it is valued, currently $133 billion. This of course sees Yahoo's share worth as $31.92 billion on paper, which is particularly impressive when you consider that the company’s share price reflects a market valuation for the whole of the company as only $35.7 billion.

It is not all good news as Alibaba chairman Jack Ma has been known to make decisions without consulting the company’s largest shareholders, leading to strained relations. Although common in China, the 202 subsidiary companies now under the variable interest entity structure is a little worrying.

During the last quarter, the share price action in Yahoo has been broadly lateral. However, the shares have now broken above the 200-daily moving average and are set to break the 100-DMA imminently. Markets are not expecting much fresh news in these latest figures, and as such a continuation to the top end of the $37-$33 price range looks likely.  

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts