The 20th of Feb 2014 will tell us what Yandex (NASDAQ:YNDX) has to show for the last quarter of 2013. Having firmly established its position as the strongman of Russia’s search business, Yandex, with its 62% market share leaves Google at a distant second with less than 26%. The company's stock price ended 2013 with a blockbuster climb of 89% and looks good for more. We look at some key metrics and what to expect from the company's upcoming results.
When it comes to key financial metrics, be it revenue growth or profitability, Yandex has displayed the kind of consistency and hunger that investors want to see. Its last 8 quarters have averaged a sequential quarterly (QoQ) revenue growth of 9.3% and an operating margin of 33%. The company has maintained an average YoY revenue growth of close to 36% over the last 4 quarters with net margins also displaying a heartening buoyancy.
In Q3 2013, Yandex recorded an elevated net margin of 49% with non-operating income coming in at $77.5 million or 77% of operating income. This unusual jump was on account of the 75% stake sale in Yandex.Money, the company’s online payments business, to Sberbank, Europe’s 3rd largest bank.
|2012 Q4||2013 Q1||2013 Q2||2013 Q3|
|Revenue (in millions of $)||290.4||257.3||281.2||315.9|
Following the stake sale on July 4th 2013, revenue from Yandex.Money is now recognized as a part other/non-operating income as opposed to a source of revenue. The proceeds from the sale contributed approximately $60 Mn of the total non-operating income with the newly formed JV (Yandex.Money) accounting for about $4 Mn, and the rest coming from Yandex’s investments.
Yandex earns almost all of its revenue from advertising. In Q3 2013, ‘text based advertising’ contributed close to 92% of the company’s revenue with ‘display advertising’ aggregating 7.7%.
Revenue from the ‘Text based advertising’ segment is sourced from the company’s own sites which garner about 75% of the segments revenue and close to 69% of the company’s total revenue. The rest of this segmental revenue is brought in through Yandex’s ad network which pockets close to 23% of its total revenues.
*Online payment commissions, the revenue from Yandex.Money which stood at 1.8% of total revenue in Q2 2013, was only part of the Yandex’s revenue mix for 4 days in Q3 where it contributed 0.1% of the quarter’s revenue.
Estimates & Revenue Guidance
The company’s revenue guidance indicates a 34%-38% growth for FY 2013 over FY 2012, which closed the year at $933 million. The implied annual revenue ranges from $1.25 - 1.28 Bn pegging its Q4 revenue at between $395 - 433 Mn, without adjusting for currency movements.
Adjusted approximately for the 5% depreciation in the Russian Ruble vs the USD since September 2013, the revenue for Q4 2013, could be in the range of $376 - 411 Mn, implying a QoQ growth of 19% - 30% and a YoY growth of about 30% - 42%.
We will take a deeper look at valuations post Q4 2013 earnings release. For now, we remain bullish on Yandex stock. Being the undisputed leader in the Russian search market, and having shown consistent growth over last 4 quarters, we feel Yandex stock has an upside of over 20% from its current price of about $40.
To see Yandex’s latest stock price movement, click here (NASDAQ:YNDX)