Yandex NV (NASDAQ: YNDX), a popular search engine in Russia, had announced the acquisition of Kinopoisk, an online film database. Yandex has been planning to widen its search service with another vertical category similar to that of Google and Yahoo. Post the completion of Kinopoisk acquisition, Yandex would combine its own search engine and personalization algorithm with that of Kinopoisk’s database to create a video recommendation service. While Yandex is widely known as the Google of Russia, Kinopoisk is known as the IMDb of Russia. According to comScore Media Metrix, Kinopoisk had a monthly user base of 18.6 million users.
Having said that Yandex is looking at the right companies for strategic acquisitions, let’s see if the company is solid with respect to its fundamentals. During the announcement of second quarter results, the company had upped its Ruble-based revenue guidance from 30-35% to 34-38%. Yandex has also been beating earnings estimates of analyst forecasts. We believe Yandex doesn’t sandbag its yearly Ruble-based revenue guidance. Analysts have also started to revise earnings forecast upwards due to consistency in Yandex’s earnings performance. A return of 76.4% on a Year-To-Date basis is a huge return that investors would be more than happy to take home.
As of Dec’12, Yandex was sitting on a huge pile of cash & equivalents of $400 million without any long-term debt. The advantage of cash-rich companies is that the company can invest in new products or acquisitions (like that of Kinopoisk) in order to grow. Yandex’s second quarter revenue grew at 35.7% Y/Y to $281.2 million vis-à-vis the EPS growth of 50% for the same period, which in turn had improved the cash from operating activities by $130 million to $380 million.
Yandex Current Valuation
When compared to its closest competitors, Yandex commands a premium due to a larger room for growth. However, it is not highly overpriced to make the stock unattractive. Please refer the table below:
The peer average of EV/EBITDA (excluding Yandex) stood at 22.4x against Yandex’s 20.9x. In addition, the company’s EBITDA had grown at 40.8% Y/Y during Jun’13 quarter. This multiple makes YNDX more attractive than others. We at Amigobulls are optimistic about Yandex stock given its strong fundamentals.