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Yandex (YNDX) Up 2.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Yandex (YNDX). Shares have added about 2.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Yandex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Yandex Q2 Earnings Miss Estimates, Revenues Rise Y/Y

Yandex N.V. reported second-quarter 2021 adjusted earnings of 4 cents per share, missing the Zacks Consensus Estimate by 89.7%.

Further, the figure declined 50% sequentially and 55.6% year over year.

Revenues were $1.12 billion. In ruble terms, the figure totaled RUB 81.4 billion, up 70% on a year-over-year basisand 11.4% from the previous quarter.

The reported revenue figure includes the consolidated financial results of Yandex.Market.

Strength across the company’s online advertising drove top-line growth. Solid growth across Search, Classifieds, Taxi and Media Services segments contributed as well.

Top-Line Details

Total online advertising revenues were RUB 39.6 billion (49% of total revenues), reflecting growth of 60% on a year-over-year basis, driven by well-performing Search and Zen as well as Listings and trends in display and video advertising in Yandex Ad Network.

Taxi revenues, excluding sales of goods, were RUB 21.4 billion (26% of total revenues), up 99% on a year-over-year basis, driven by improvement in ride-hailing and drive businesses as well as strength in logistics businesses.

Other revenues of RUB 7 billion (9% of total revenues) surged 133% from the prior-year quarter. This was primarily driven by well-performing Media Services and expanding cloud business.

Revenues from sales of goods were RUB 13.4 billion (16% of revenues), which jumped from $2.9 billion in the year-ago quarter. The growth was primarily due to the consolidation of Yandex.Market.

Segments in Detail

Search and Portal: The segment generated revenues of RUB 39.4 billion (48.4% of total revenues), up 54% year over year. The company’s strong position in the Russian search market remains a key catalyst. Its market share was 59.7% in the reported quarter, up 10 basis points (bps) year over year. This can be attributed to expanding Yandex’s mobile search share.

Mobile revenues accounted for 56.7% of the company's search revenues. Further, mobile search traffic accounted for 63.3% of total search traffic. This was driven by Yandex’s search share on Android, which was 59.5%, expanding 200 bps from the year-ago quarter.

Taxi: The segment generated RUB 28.1 billion revenues (34.5% of revenues), rising 114% from the year-ago quarter. The impressive rise was driven by positive contributions from Yandex.Lavka, which benefited its FoodTech services in the quarter under review. Further,growth in the ride-hailing and drive business as well as car-sharing and logistics remained a major positive. The number of rides increased 104% from the prior-year quarter.

Yandex.Market: The segment generated revenues of RUB 8.8 billion (10.8% of revenues), up 23% from the previous-year quarter. GMV of Yandex.Market marketplace grew 144% year over year, driven by audience growth, expansion in assortment and logistics infrastructure, transition of merchants from CPC to CPA and integration with Yandex Plus program. The number of active buyers on this marketplace accounted for 7.1 million by the end of the reported quarter and grew 78% year over year.

Media Services: The segment generated revenues of RUB 4.1 billion (5% of revenues), increasing 141% from the year-ago quarter. This can primarily be attributed to solid momentum across Yandex.Plus subscription and advertising. The number of subscribers of Yandex.Plus grew 128% from the prior-year quarter and accounted for 9 million.

Classifieds: The segment generated revenues of RUB2 billion (2.5% of revenues), reflecting year-over-yeargrowth of 125%. This was attributed to growth in auto dealers’ listings.

Other Business Units and Initiatives: The segment accounted for revenues of RUB 4.9 billion (6% of total revenues), up 140% from the prior-year quarter. This was driven by the robust performance of Yandex’s Zen and Devices businesses. The growing cloud business contributed as well.

Operating Details

In second-quarter 2021, adjusted net income margin was 1.2%, contracting 340 bps from the year-ago quarter.

Operating expenses were RUB 86.1 billion, which was up from RUB 41.3 billion in the prior-year quarter.

The company incurred a loss of RUB 4.7 billion from operations compared with RUB 116 million of income from operations.

The company’s total traffic acquisition costs (TAC) amounted to RUB 6.2 billion, up 50% on a year-over-year basis. As a percentage of revenues, the figure contracted 230 bps to 7.7% in the reported quarter.

Balance Sheet & Cash Flows

As of Jun 30, 2021, cash and cash equivalents were $1.21 billion, down from $1.23 billion as of Mar 31, 2020.

Accounts receivable totaled $387.1 million, increasing from $359.7 million in the previous quarter.

In the second quarter, cash used in operations was $67.3 million against $113.1 million of cash generated from operations in the first quarter.

2021 Guidance

For 2021, the company projects total revenues between RUB 330 billion and RUB 340 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -60% due to these changes.

VGM Scores

At this time, Yandex has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Yandex has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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