goog, yhoo, amzn estimates and targets

8/9/2019 GOOG, YHOO, AMZN Estimates and Targets

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October 10, 2007

Brian BolanDirector of Research;

312-253-0578;[email protected]

Boosting Estimates for Yahoo!, Google and Amazon.com

Boosting Targets for Yahoo!, Google and Amazon.com

Next week is earnings week for the big internet players, with Yahoo!, eBay and Google reportingon consecutive days. We are increasing our estimates for Amazon.com and Google, Yahoo!. The trendof advertisers moving to the internet has continued, and we expect Yahoo! and Google to benefit from thistrend. Yahoos improvements in search will likely drive higher the key RPS (revenue per search) metric

but we also see some gains in the display ads. Google continues to build on improvements in the past andcontinues to lead the market.

Amazon.com, which launched a music store a few weeks ago is seeing continued demand for itsproducts and services. We are increasing estimates in both the third and fourth quarter of this year basedon our expectations of higher sales and a slight tweak higher on gross margins. The tweak on grossmargins has pushed our EPS estimate well above Wall Street consensus and may prove to be tooaggressive. For the third and fourth quarters we are modeling gross margins of 24.5% and 22%respectively. Lower margins in the fourth quarter are generally offset by significantly higher sales.

We are increasing our target price on Amazon to $110 from $90 to reflect our confidence in

managements ability to continue to increase margins. The new price target reflects an increased multipleof 89x earnings (this year) and incorporates our higher earnings estimate. At this point, we have notreleased our estimates for 2008, but we believe that our estimates will be among the most aggressive onthe street.

Important Disclosures

Jackson Securities, LLC does or seeks to do business with companies covered in itsresearch reports. As a result, investors should be aware that the firm may have a conflictof interest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decisions. Please also refer tothe important disclosures found on pages 8 thru 10. Analyst Certification is found onpage 8.

Source: JacksonSecurities,

companyreports


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In looking forward to the Google earnings release, we believe we will see a few key ideas jumpout at us. First is the idea of expanded use internationally of the Google search product. Third party datahas shown that Google continues to grow share, and is doing so rapidly in the European market. Whilewe believe that Yahoo! has stopped the bleeding in terms of its market share losses to Google, other, lesssavvy market share holders are experiencing significant share losses to Google. Another idea that is likely

to come up on the conference call is that of building on prior improvements. This is really code for bettermonetization efforts across several fronts.

Academic searches are generally a driver for Google in third quarter, and we expect that trend tocontinue. Recent tuck-in acquisitions also give us faith that growth will continue throughout 2008. Wehave yet to release estimates for 2008, but as is the case for Amazon, we believe that we will carry somevery aggressive estimates for the leader in the search market. We are increasing our price target onGoogle reflect our confidence in their continued growth outlook. We are rounding up our price target toreflect at 43x multiple of this years estimate, giving us a target price of $670.

Last but certainly not least is Yahoo!. Yahoo! has seen some fairly dramatic swings in its stockprice over the course of 2007. A rumored buyout by Microsoft led us to a sell rating for shares of Yahoo!,and a subsequent decline in price helped us raise our rating. We are increased our estimates for third andfourth quarter of this year due to likely gains in RPS and continued strength for display ads. Ourestimates for Yahoo! might be a small bit aggressive and the real story is likely not to be the number, butwhat the 100 day re-org produces. So far we have seen Yahoo! to continue to acquire companies, a trendthat is not likely to slow down.

Google Price Target Matrix

Source: Jackson Securities, company reports


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Continued speculation of a possible Microsoft buyout of Yahoo! is overblown. We believe thatinvestors would do well to be extra cautious on Yahoo! given the recent run in the stock and the potentialfor a status quo re-org from Jerry Yang. Continued search improvements will only do so much, the realneed at Yahoo! is a clear focus on the direction of the company and there upon maximizing efficiencies.

With our increase in EPS and comes an increase in the multiple and increase in our target price.We believe that $26 is more than reasonable given our fears on corporate direction, which are offset by

probably RPS gains.



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BUY initiated 5/21/07: $63.30Target: $75.00

BUY maintained 9/5/07: $82.70Target: $90.00

Hold 12/14/06: $26.60 Target:$26.00

Downgrade to Hold 7/19/06:$32.24 Target: $33.00

Buy initiated 7/14/06: $32.23Target: $37.00

Downgrade to Sell 5/4/07:$28.18 Target: $26.00

Upgrade to Hold 8/30/07:$22.55 Target: $22.00

BUY maintained 10/10/07: $95.32Target: $110.00

Hold 10/10/07: $28.37 Target:$26.00


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Disclosures:

Analyst CertificationI, Brian Bolan, hereby certify that the views expressed in this research report accurately reflectmy personal views about the subject securities and issuers. I also certify that no part of mycompensation was, is, or will be, directly or indirectly, related to the specific recommendations orviews expressed in this research report. I may be compensated in part based on the overallprofitability of Jackson Securities, LLC, which includes earnings from investment banking and allother aspects of the firms business.

Conflicts of interest:Neither Jackson Securities nor any of its publishing analysts or their immediate family members

has a position in the securities described herein.

Compensation: The research analyst has not received compensation based upon investment banking

revenues or from the subject company in the last 12 months.

Jackson Securities has not in the last 12 months managed or co-managed a publicoffering of securities, received compensation for investment banking services from thesubject company or any compensation for products or services other than investmentbanking

Buy initiated 6/26/06: $404.22Target: $500.00

Buy 7/21/06: $387.12Target: $500.00

Buy 2/01/07: 481.75 Target:$560

Buy 10/10/07: 615.18 Target:$670


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Jackson Securities will seek investment banking compensation from the subject companyin the next 3 months.

Position as Officer or Director:Neither the research analysts nor members of their immediate households occupy positions as

an officer or director with the company/companies mentioned in this report.

Market Making:Jackson Securities does not make a market in this stock

Explanation of Ratings:

Buy - Expected 12-month absolute performance of +10% or higher than the market price at which timethe rating was issued.

Hold - Expected 12-month absolute performance of +5% to 5% from the price at the time the rating wasissued.

Sell - Expected 12-month absolute performance of 10% or lower than the market price at which time therating was issued.

Distribution of Ratings:Jackson Securities, LLC has a distribution of ratings among its coverage universe as follows:

Buys 50.0% (19 of 38 active recommendations)Holds 44.7% (17 of 38 active recommendations)Sells 5.3% (2 of 38 active recommendations)

Jackson Securities has provided investment banking services within the previous 12 months with thefollowing percentage of the companies they have rated:

Buys 0.0% (0 of 38 active recommendations)

Holds 0.0% (0 of 38 active recommendations)Sells 0.0% (0 of 38 active recommendations)

Risks: General economic conditions, economic slowdown/recession, adverse industry news.

Other Important Disclosures and Disclaimers

Disclaimer: This communication is neither an offer to sell nor a solicitation of an offer to buy anysecurities mentioned herein. This material should not be construed as an offer to sell or the solicitation ofan offer to buy any securities mentioned herein in any jurisdiction where such an offer or solicitationwould be illegal. We are not soliciting any action based on this material. This document is for general

information only, and it does not constitute a personal recommendation or take into consideration theparticular investment objectives, financial condition or financial needs of any clients. Before acting on anyadvise or recommendation in this research report, clients should consider seek professional advice. Pastperformance is not a guide to future performance. Future returns are not guaranteed, and a loss of originalcapital may occur.

The information contained herein has been obtained from sources that we believe to be reliable, but we donot guarantee its accuracy or completeness. Any opinions expressed herein are statements of ourjudgment on the date appearing on this material only and are subject to change without notice. We


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endeavor to provide updates on a reasonable basis of the information discussed in research reports, butthere may be reasons which prevent us from doing so.

Additional Information: Any additional information, if applicable, supporting this recommendation maybe furnished upon request. This report is not directed to, or intended for distribution to or use by, anyperson or entity who is a citizen or resident of or located in any locality, state, country or other jurisdictionwhere such distribution, publication, availability or use would be contrary to law or regulation or which

would subject Jackson Securities or its affiliates to any registration or licensing requirement within suchjurisdiction. This report is prepared for the use of Jackson Securities clients and may not be redistributed,retransmitted or disclosed, in whole or in part, or in any form or manner, without the express writtenconsent of Jackson Securities.

Jackson Securities, LLC.

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