Yandex versus its competitors
We’ve compared Yandex with other search engine stocks, such as Google (GOOG), Baidu (BIDU), Yahoo (YHOO), and Microsoft (MSFT). Microsoft’s Bing currently powers Yahoo’s search under a 2009 agreement, but Yahoo is trying to look for ways to end the partnership, as its revenue is declining due to lower search market share. From a multiples perspective, Yandex trades cheaper, at a 26.1x P/E, compared to Internet behemoths Google and Baidu (which is dominant in China). Yandex has the highest profit margins and gross margins among its peers.
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In terms of estimated EPS growth, Yandex’s growth rate is almost in line with that of peers Google and Baidu, which appears to be leading forward P/E growth.
Yandex repurchased 10 million shares as of February 18, 2014, as part of a previously announced share repurchase program, and increased authorization to repurchase a total of up to 15 million shares. It placed $600 million of 1.125% convertible senior notes due 2018 in December 2013 and an additional $90 million in January 2014. The proceeds will be used to fund a share buyback program and for general corporate purposes.
Russian stocks including Yandex, the Micex index, and the VanEck Vectors Russia ETF (RSX) plunged earlier this month, impacted by geopolitical risks arising from the Russian invasion of Crimea. Russian stocks witnessed a selloff over concerns on the limited U.S. and European Union sanctions against Russia, which is already experiencing an economic slowdown. A decline in discretionary spending could affect companies such as Yandex, whose growth depends on advertising revenues. However, some analysts believe the selloff is temporary and that investors can see a fall in Yandex’s share price as a significant buying opportunity.
To find out more about the international web advertising market and another important player, Baidu, please see the Market Realist series Why Baidu focuses on mobile as its Q4 top-line grows fast.