Tuesday, July 5, 2011

Yandex (YNDX) - After Silent Period, Every Analyst is Uber Bullish but Goldman

On the topic of the incestual relationship between companies and analysts, a funny situation happened last week.  After taking LinkedIn (LNKD) public in the mid $40s the stock shot up well over $100 before 'coming back to earth' in the $70s-$90s.  Despite a roughly doubling of valuation the investment bankers deemed 'fair value' a month earlier, the analysts from these same sordid banks were jumping over each other last week to throw 'buy' recommendations on the stock.  So apparently the the intrinsic value of LinkedIn changed by a factor of 100% or so within 30 days.  Reading some of the valuation metrics for how they justified the buy rating and new price targets for LNKD last week, made for some entertaining fiction.  Just another day on Wall Street.

Speaking of recommendations after the IPO, today we have the crew coming out supporting Yandex (YNDX).  As you can imagine, despite a valuation 50% higher than the investment banks brought it public [May 24, 2010: Yandex Up Nearly 60%] at a mere 30 (business) days ago, almost everyone is throwing the 'buy buy buy' flag in the air.  Well one exception... Goldman Sachs.

Via Forbes:

  • Five investment firms picked up coverage of the Russian Internet search giant Yandex this morning, mostly with a positive spin. Note that all five the firms were underwriters for the firm’s initial offering. (this is where you wink and nod...)
  • Goldman analyst Alexander Balakhnin starts the company with a Neutral rating and $36.10 price target. “We expect Russian Internet penetration to grow by 71% through 2010-15, and believe the Russian Internet advertising market will expand at a 35% CAGR [compound annual growth rate] over the same period. Thanks to first-mover advantage, dedication to product development and dominance in its market, we see Yandex as well-positioned to capture internet growth; we forecast a 2010-15 EPS CAGR of 33%,” he writes. But the Goldman analyst also notes that the stock trades at 39.5x expected 2012 EPS, “a premium to the Chinese Internet stocks.” The analyst adds that “as Chinese peers benefit from regulatory protection, this premium is unlikely to widen, in our view.”
  • Pacific Crest analyst Steve Weinstein launches with an Outperform rating and $45 target price. “We like YNDX because the company has a commanding market position, excellent technology and operates in a large market, which is being driven by strong secular trends,” he writes.
  • Piper Jaffray analyst Gene Munster sets an Overweight rating and $40 target. “We believe YNDX deserves to trade at a premium to the group given higher top-line growth and a proven business model,” he writes. “Long term, we believe the Russian Internet opportunity compares well to the open-ended opportunities in China and Latin America and expect Yandex to be the biggest beneficiary of growing Internet usage in Russia.”
  • Morgan Stanley analyst Joseph Okleberry starts the company with an Overweight rating and $42 target. “Yandex is the leading Internet company in Russia, a country poised for robust growth in Internet usage and advertising spend,” he writes. “Yandex’s record of innovation and execution should drive annual revenue and EPS growth of 40% through calendar 2015.”
  • Deutsche Bank analyst Jeetil Patel launches with a Buy rating and $40 target. “Yandex is the leader in search in Russia (with an est. 65% share), but the company’s dominant position in other Internet categories (maps, news, mail, shopping, payments to name a few) hold long term upside from a usage, and a business model innovation standpoint,” he writes.

[May 22, 2010: Yandex - the "Russian Google" - Next Week's Hot IPO?]

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