Is Tumblr Yahoo’s Dark Horse?
Yahoo! (NASDAQ: YHOO) bought Tumblr in May of 2013 for $1.1 billion with the intent of breaking into the social media sector and monetizing the website. It looks like this goal is coming to fruition as Yahoo CEO Marissa Mayer announced in October that Tumblr is poised to generate over $100 million in revenue in 2015. Mayers stated in November that Tumblr’s sponsored advertising content was increasing and that the user base has grown 40% since Yahoo bought it.
Additionally, Yahoo completed the acquisition of BrightRoll on December 15th for $640 million. BrightRoll automates video advertisements and streamlines the process of planning and targeting a video campaign. In a December 15th press release, Yahoo stated that BrightRoll’s net revenue is expected to exceed $100 million in 2014 and the acquisition will improve Yahoo’s EBITDA.
On December 23rd, analyst Victor Anthony of Topeka Capital reiterated a Buy rating on Yahoo and increased his price target from $57 to $60. Anthony stressed the importance of Tumblr, noting that it is “an under-appreciated asset within core Yahoo” and is “expected to turn a profit in 2015.” He continued, “Tumblr is hardly on the radar of investors” even though its monthly user base has grown 50% year-over-year and average time on the site has increased from 22 minutes to 28 minutes. Furthermore, Tumblr “over-indexes on teens relative to other social media platforms,” which is crucial since Facebook investors are beginning to worry that Facebook is losing popularity amongst teenagers.
Anthony detailed that Yahoo “is seeing momentum and progress in the areas that matter most – mobile, social, native and video, which collectively grew 80% YoY.” He noted that the recent BrightRoll acquisition will help Yahoo surpass revenue guidance “by a meaningful margin and again grow strongly in 2016.” The analyst increased his 2015 revenue outlook by 2% to $4.473 billion from $4.378 billion and increased his 2015 EPS outlook from $0.97 to $1.01. Anthony has rated the stock 9 times since April with a +34.3% average return per Yahoo recommendation.
Victor Anthony has rated many tech stocks, including Facebook (NASDAQ: FB) and Amazon (NASDAQ: AMZN). He has rated Facebook 29 times since June of 2013 with a 93% average success rate recommending the stock and a +53.4% average return per Facebook recommendation. However, Anthony has not been so successful with Amazon. He has rated the e-commerce site 18 times since May of 2013, but has only been successful 44% of the time with a negative average return of -1.2% per Amazon recommendation.
Overall, Victor Anthony has a 62% success rate recommending stocks with an average return of +15.7% per recommendation.
Anthony is optimistic about Yahoo’s acquisition of BrightRoll, but do you think that Tumblr will have a significant impact on the company’s bottom line?