Yahoo (YHOO): Strong Third Quarter Results Could Restore Investors’ Confidence After Data Breach

Yahoo! Inc. (NASDAQ:YHOO) generated outstanding performance in the third quarter and has also beaten earnings estimates by $0.06 per share. Its revenue surged 6.5% to $1.305B, compared with the same period of last year. Yahoo’s Mavens revenue (mobile, video, native and social) increased strongly by 24.2% to $524M, while non-Mavens revenues also increased 4.8% to $726M compared with the same period last year.

The company’s total traffic-driven revenue surged 12% to $1.25B, while non-traffic-driven revenue declined to $55M from $111M over the same period year-ago. Yahoo’s mobile revenue also increased massively by 46.1% to $396M, relative to the same quarter of the previous year.

The company’s profits also soared, as management effectively reduced capital spending and slashed 300 jobs during the third quarter. Yahoo generated net income of $163 million in the third quarter, compared with net earnings of $76 million. The company launched several new products during the quarter, including Yahoo Newsroom for iOS and Android, new and enhanced features on Tumblr and new mobile experiences for sports fans directly from within the Yahoo Sports app.

The company also appears to be in a strong cash position. Its cash equivalents and marketable securities stood around $7.771 million by the end of the third quarter, representing a growth of $938 million.

Despite a strong financial performance, the company’s share price performance and future fundamentals are highly dependent on Verizon Communications (NYSE:VZ) $4.8 billion deal to buy Yahoo’s internet operations. The deal is under threat since Yahoo disclosed that about 500 million accounts had been hacked. Yahoo has suspended its earnings conference for the third quarter due to the pending Verizon deal, which left many questions unanswered, mainly about the data breach and its implications on Verizon deal.

DISCLAIMER: The author does not hold any positions in any of the above companies.

Alexander is an analyst for who specializes in index and commodity trading. His outlook is usually near-term to medium-term. He has over 10 years of experience in the financial industry and began his career at the dealing desk. Alexander holds a Bachelor’s degree in Economics from University of Delaware.