While Google (GOOG) has a stranglehold on the U.S. search market and Baidu (BIDU) remains dominant in China, Russia-based Yandex (YNDX) has also emerged as a formidable player in the space with a market capitalization of $7.9 billion.
STILL UNDER THE RADAR
It’s not a widely-known name, but don’t let that be a deterrent but U.S. mutual fund managers have been buying the stock hand over fist in recent months — not surprising since the company has a pristine balance sheet and growth prospects are solid.
INSTITUTIONAL SUPPORT
At the end of the second quarter, 240 funds owned the stock, up from 201 at the end of the first quarter. The highly regarded Oppenheimer Developing Markets Fund (ODMAX) has a big position. As of the latest reported period, it held 13.4 million shares.
RISING RUSSIAN DEMAND
Clearly, rising Internet usage in Russia is working in Yandex’s favor. There were 62 million internet users in Russia in 2011, representing 45% of the population, according to eMarketer. According to Russia’s Minister of Communications, the number could hit 90 million in 2013. Yandex’s share of Russia’s search market is around 60% but Google is holding its own at around 25%.
GOOD NUMBERS
In late July, second-quarter profit at Yandex rose 36% from a year ago to $0.19 a share. Sales growth decelerated for the second straight quarter but still rose 29% to $209.7 million. The company served ads for more than 193,000 advertisers in the second quarter of 2012, up 34% from a year ago.
Full-year profit is seen rising 28% this year to $0.82 a share and 34% in 2013 to $1.10. Despite strong growth prospects, Yandex’s valuation is still palatable at 32 times trailing earnings and 22 times forward earnings — not cheap by any means but not excessive either.
KEY LEVELS
The Russian search firm went public in May 2011 at $25 a share. Its most recent base started in April. The stock corrected just over 40% before hitting a low of $16.65 mid-June. Several above-average volume price gains in recent months point toward institutional buying and with the market still in an uptrend, I wouldn’t be surprised to see Yandex take out its recent high of $25.23 soon.
Looking for more trading ideas? Read our daily Markets section here.
