Can Yahoo Recover?

With shares of Yahoo (NASDAQ:YHOO) trading around $33, is YHOO an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Yahoo is a technology company that provides search, content, and communication tools on the Web and on mobile devices worldwide. It operates Yahoo.com, which offers Yahoo Search, Yahoo News, Yahoo Sports, Yahoo Finance, Yahoo Entertainment and Lifestyles, and Yahoo Video. Being such a large content provider, Yahoo is able to reach a significant amount of consumers across the globe. As the Internet attracts an increasing number of participants, look for Yahoo to continue to be a major player.

Yahoo, on Tuesday, reported results for the quarter ended June 30, 2014. “Our top priority is revenue growth and by that measure, we are not satisfied with our Q2 results. While several areas showed strength, their growth was offset by declines. Yahoo Search, for example, had a strong quarter, growing 6 percent year-over-year on a revenue ex-TAC basis and 19 percent year-over-year in search click-driven revenue. Our social, mobile, video and native areas also grew with significant momentum, collectively gaining nearly 90 percent year-over-year. However, display remains an area of investment and transition. In Q2, we saw display revenue decline, further highlighting the fact that we need to work faster to ameliorate the negative trends. I believe we can and will do better moving forward,” said Yahoo CEO Marissa Mayer. “Overall, I remain confident in Yahoo’s future, our strategy, and our return to long-term growth.”

Non-GAAP income from operations was $194 million for the second-quarter of 2014 compared to $209 million in the second-quarter of 2013. GAAP net earnings for the second quarter of 2014 was $270 million (which included restructuring charges of $33 million, net of tax, and gains from sales of patents of $43 million, net of tax), a 19 percent decrease compared to $331 million in the second-quarter of 2013 (which included restructuring charges of $2 million, net of tax.) Non-GAAP net earnings for the second quarter of 2014 was $382 million, a 1 percent decrease from the same period of 2013. GAAP net earnings per diluted share was $0.26 in the second-quarter of 2014 (which included restructuring charges of $0.03 per diluted share and gains on sales of patents of $0.04 per diluted share), compared to $0.30 in the second-quarter of 2013. Non-GAAP net earnings per diluted share was $0.37 for the second-quarter of 2014, compared to $0.35 in the second quarter of 2013.