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July 20, 2010 2:22 PM EDT
Internet giant Yahoo! (NASDAQ:YHOO) faces a challenging market environment and analysts expect its revenues growth to remain weak unless it unexpectedly makes a major move.
Yahoo! share prices peaked during the dot.com bubble and then partially recovered during the market rally that followed it. However, its share price began to decline at the beginning of 2006 and has traded lower ever since. It also largely missed the furious rally that began in March 2009 while internet advertising rival Google (NASDAQ:GOOG) has rallied about 50 percent since then.
Going back to 2006, Yahoo! revenues have gone nowhere; they were $6.4 billion in 2006, $6.9 billion in 2007, $7.2 billion in 2008, and $6.4 billion in 2009.
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Yahoo! will report earnings on Tuesday after the market closes. Analysts are expecting earnings per share of $0.14 on revenues of 1.16 billion. Last year in the second quarter, it reported earnings of $0.10 per share on revenues of $1.57 billion.
Causes of Lackluster Revenues
Clayton Moran, stock analyst with the Benchmark Company, said that roughly around 2006, it became apparent that increased competition and the secular trend of fragmentation in the online world will devalue Yahoo!'s portal model.
In other words, gone are the days when internet users flocked to portals for all their needs and players like Yahoo!, AOL, and MSN dominated the market. Today, people spread out their internet usage among various sites.
This fragmented environment favors more specialized websites like Google (search), YouTube (video), and Facebook (social), said Moran.
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