Shares of Yahoo Inc. rose in premarket trading Wednesday after its fourth-quarter results showed signs the Internet company may have turned a corner after a yearlong slump.
Yahoo's revenue is showing some stability, particularly in online billboards called display ads, Merriman Curhan Ford analyst Richard Fetyko said in a note to investors. Revenue from display ads were up 26 percent from the third quarter.
Fetyko thinks ad budgets hit a bottom in the second quarter and that Yahoo is poised to benefit from a recovery in advertising spending.
Late Tuesday, Yahoo said it earned $153 million, or 11 cents per share, in the quarter, compared with a loss of $303 million, or 22 cents per share, in the prior year.
Excluding one-time items, Yahoo would have earned 15 cents per share, exceeding the 11 cents expected by analysts polled by Thomson Reuters. But revenue fell 4 percent to $1.73 billion.
Shares of Yahoo, based in Sunnyvale, Calif., were up 44 cents, or 2.8 percent, to $16.43 in premarket trading.
Kaufman Bros. analyst Aaron Kessler kept his "Buy" rating on Yahoo. While noting that Yahoo lost market share to Google Inc. in search advertising, he said Yahoo expects search and display ad revenue to increase in 2010.
He raised his revenue estimate and adjusted earnings estimates for this year.
But Deutsche Bank analyst Jeetil Patel kept a "Hold" rating on the stock, saying weakness in its search ads shows that companies are shifting their advertising spending to Google. Search ad weakness, he said, overshadows a recovery in display ads.
Patel lowered his revenue and earnings estimates for the first quarter. He also cut his fiscal 2010 revenue forecast but slightly increased his estimate for earnings for the year, excluding one-time items, due to a lower tax rate.
"Stabilizing search volume declines is critical for Yahoo," Patel said in a research note. "If the company can't figure out a strategy of growing clicks, it will not see much participation as the advertising market recovers."
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