YHOO, GOOG, OMC, Publicis, NLSN and More: Media Wall Street Report 4-20

Yahoo

Yahoo (YHOO) reported results on Wednesday that positively surprised many analysts. The company delivered upside in Search with good margins, essentially offsetting a weakness in Display. New CEO Scott Thompson provided more color on restructuring efforts of the core business, emphasizing innovation and a pared-down product offering. JP Morgan's Doug Anmuth believes that it's still a show-me story when it comes to Yahoo's core business and he's still at Neutral with a $17 PT.

Perry Gold at Barclays, on the other hand, likes the cost cutting/restructuring efforts and is bringing his EBITA estimates for the year up to $1.83B (from $1.51B). Consequently, he's moving his target up to $20 from $18. He's also incrementally positive on the potential of a deal for the firm's Asian assets. "Management is currently exploring a simplified transaction structure, which if executed could provide greater certainty of monetizing a portion of YHOO's Alibaba stake," he wrote in a research update for investors.

Needham analyst Laura Martin confirms CEO Thompson's strategy focus on metrics in 3 silos: media, connections, and commerce. According to her research, cutting costs should free up money to fund expansion in these 3 areas. She's on board with the new leader's push to monetize YHOO data. She's sticking to her BUY rating and $19 PT.

Google

After reporting results last week that weren't all THAT bad, Google (GOOG) shares have slipped over 6%. After numerous questions from investors as to why the shares were dropping, JP Morgan's Shelby Taffer published a note with his attempt to explain the weakness. Investors may be concerned with the search firm's decelerating revenue — net revenue growth went from 27.11% in 4Q11 to 24.4% in 1Q12. Combined with historically-tough Q2 comps, questions about how GOOG will run its new handset business (acquired MMI) and the new C class shares we discussed in last week's Wall Street Report, the analyst believes the Street is overly-concerned.

"Much of what we discuss is known and understood, and 1Q results actually suggest solid 20%+ revenue growth is likely for 2012 with potential for better than previously expected earnings," Taffer said. He thinks the stock is attractive at almost 12x 2013E PF EPS.

Publicis

It was a mixed bag of performance when Publicis (PUBGY) reported its Q1 earnings this week. Europe came in surprisingly good with a strong performance from emerging markets, while North America business disappointed BMO Capital Markets analyst, Dan Salmon. He believes the stock is pricing in a "moderate global economic recovery" with little chance of upside estimate revision. On the back of results, Salmon took his 2012 EPS numbers up a bit (to $3.15 from $2.92). He's still got a Market Perform on the stock.

Hulu

Continuing our upfront coverage from last week's Wall Street Report, it was Hulu's turn to make an upfront presentation — the first time that digital firms like AOL, Google, Microsoft, and Yahoo participated in the upfront conversations. Barclays Bo Tang believes Hulu and competitors are attempting to accelerate the shift of ad budgets to the Internet, emulating the TV sales process including guaranteeing impressions and selling ratings points.

After the presentation, Tang remarked in a report to investors that he believes "the original programming landscape is becoming more competitive and Hulu's original content strategy allows the company to differentiate itself while making it less reliant on its major content partners." And more self-sufficient it's becoming — Hulu reported it now gets 38M visitors per month, has 360 content partners and its subscription offering (Hulu Plus) has broken 2M paid subs. All this generated $420M in revenue last year, up 60% over 2010.

Omnicom Group

Omnicom Group (OMC) delivered a beat this week with EPS coming in at $0.72, ahead of a consensus $0.69. The surprise came from strength in the US division of the global ad agency. The company has worked strongly to expand profitability, announcing that it expects margins to hit 2007 levels by the end of 2012. Dan Salmon at BMO is impressed by emerging market growth, with Russia and Turkey exhibiting double-digit growth. He raised his EPS estimates to $3.70 for 2012 and reiterated his $49 target price.

Barclays analyst, Bo Tang hiked up his price target to $54 from $50, bolstered by the firm's international organic growth of 5.8%, well ahead of the 4.1% consensus. "Omnicom has been significantly investing in its people and capabilities in order to drive upside to digital and has been employing an "open source" approach through partnerships with technology leaders to ensure access to the latest innovations in the marketplace," the analyst broadcasted to the firm's investors this week.

Even a strong quarterly performance out of OMC wasn't enough to get Nomura analyst Michael Nathanson to budge off his Neutral rating. He points out the limited operating leverage exhibited by OMC during the last business cycle. Ultimately, the analyst just can't get excited on the Omnicom investment case when there are so many pure-play media names out there.

Netflix

With earnings coming up on Monday for Netflix (NFLX), Janney's Tony Wible was out waving his yellow flag on the stock again. Remember, he's got a big ol' fat SELL rating on the stock as he feels a slowdown in sub growth is around the corner. It's tricky to scale the low margin streaming business which is cannibalizing the higher-margin DVD biz.

Wible is reading the Internet traffic tea leaves and sees a deceleration in interest in NFLX over the past few months, tracking to 7.5 million hybrid subs for the quarter -- at the lower range of the firm's projections. Combined with the fact that the firm is changing its DVD acquisition technique and increased talk of partnerships with MSOs, the media analyst sees a wall of caution for investors to climb for the stock when it reports. He lowered estimates (again) and brought his PT down to $55.

eBay

Barclays analyst Anthony DiClemente was impressed by eBay's (EBAY) quarter, with a beat and raise (top and bottom lines) on results for the quarter and estimates for FY 2012. Revenues totaled $3.3B and non-GAAP EPS $0.55. The analyst cited a re-acceleration of revenue growth in the Payments division, with the jewel-in-the-crown PayPal leading the day. Payments margins of 26.4% were the highest level in 5 years.

Credit Suisse's Spencer Wang also rang positive on eBay's fundamentals in a review of the quarter he published on Thursday. "We remain bullish on the longer term mobile payments/Point-of-Sale opportunity for PayPal," wrote Wang. In spite of his positive bias, the analyst is sticking with his Neutral rating based on what he believes to be a rich valuation.

Zynga

It wasn't all fun and games for Zynga (ZNGA) this week. The online casual gaming leader saw its price target cut by Kevin Allen, analyst at Barclays. While the analyst remains positive on the long-term growth potential of the sector and ZNGA in particular, he's reducing his estimates and expects fellow analysts to do so, as well. As mobile becomes a bigger part of Zynga's business, margins are getting squeezed -- Allen estimates the firm monetizes mobile at just 1/3 − 1/2 of its desktop service. He'd also like to see a pickup in organic growth before he gets more positive on the name. Barclays' new PT on ZNGA is $11 (down from $12). Allen's got an Equal Weight rating on the stock.

Nielsen

Market insight company Nielsen (NLSN) reports next Wednesday and Needham's Laura Martin was out this week with an earnings preview. She's expecting 1Q12 revenue estimates of $1.361B and EPS of $0.30. She cautions investors to keep an eye on rising competition in the firm's Watch segment as more PeopleMeter-like devices abound. Keep an eye on the firm's Buy group, which tracks consumer purchases. She expects a 5% growth rate.

IAC/Interactive

John Blackledge at Credit Suisse focused on search revenues while he was out preparing investors for IAC/Interactive's (IACI) earnings event to be held on May 2nd. While IACI's revenues grew 24% annually since 2009, search revs have accounted for 64% of IACI's revenues during this period. The analyst is positive on the name as he thinks the risk-reward is pretty favorable for good performance out of Search, driven by SEM activity on Ask.com and revenue growth at Mindspark. He's leaving his Outperform and $56 PT as is.

Earnings are in focus as pure plays look to capitalize on strong growth and profitability.

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