Jefferies & Co.’s David Reynolds today initiates coverage of Russian search-engine company Yandex (YNDX) with a Buy rating and a $40 price target, writing that the company has withstood Google’s (GOOG) advances in its home country and that the Street underestimates its growth prospects.
Yandex went public on May 24th at an offer price of $25. The stock popped the first day but is down 26% in the months since. It is up 10 cents today at $28.71.
Reynolds argues the Russian online ad market, and the search engine part of it, are both better than many believe. He also thinks Yandex can grow just as Google and China’s Baidu (BIDU) have in past.
“The trail has been blazed by Google, then Baidu and now Yandex,” writes Reynolds.
“The metrics are established – first rate, scalable search technology integrated with an innovative, dynamic advertiser platform captures online advertising revenue very efficiently.”
As for the market, “Forecasts see Russian online advertising growth of 26% compounded annual growth rate in 2010 through 2013, leading to consensus revenue growth at Yandex of 43% into 2012. We believe current growth is in excess of 50% and accelerating, we see 2012 revenue growth of 52%.”
Reynolds sees revenue of 19.62 �billion Russian Rubles this year, and EPS of 16.30 Rubles per share. While Reynolds argues that he’s more optimistic than consensus, those numbers are actually slightly below what First Call cites.
The First Call consensus in Rubles is 20.94 billion in revenue this year, and 18.07 Rubles per share.
I have a call in to Reynolds to clarify this point.
Update: Reynolds points out that although he is close to consensus for this year and next, in later years, his numbers diverge more sharply.
For example, while the Street models 37.78 billion Rubles in 2013 for revenue, his estimate his considerably higher, at 46.1 billion.
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