FOCUS: Uncertainty undermines Yandex, VK quotes while Ozon soars on e-sales

By Yekaterina Yezhova

MOSCOW, Dec 18 (PRIME) -- The share price of Russian Internet company VK has slightly outdone its peer Yandex in 2023 amid persistent uncertainty about the latter’s restructuring, while Ozon’s receipts almost doubled thanks to soaring e-commerce, analysts said.

“The split-up of Yandex’s business is now the key issue in the company’s investment case. Market valuation will depend on the transaction’s structure, new shareholders, presence or absence of an offer to the minorities,” Dmitry Puchkaryov, a stock market expert at BCS World of Investment, told PRIME.

“There is still uncertainty in this issue – it is the main restraining point for the shares. It has also become one of the key reasons the market turned a blind eye to the continuing robust revenue increase in 2022–2023.”

Yandex’s ordinary shares climbed by 21.9% since the beginning of the year to close at 2,212.80 rubles on December 15 on the Moscow Exchange.

“We think the investors are truly waiting for the company’s restructuring that would negate the geopolitical risks and ensure sustainable development of all vectors of the Russian business,” Cifra Broker analyst Natalia Pyreva said.

She added that the market stays positive about Yandex’s growth prospects, “which its financial results prove on a quarterly basis.” The analyst set the 12-month price target at 3,000 rubles.

Finam analyst Leonid Delitsyn said the investors’ memories of the company’s NASDAQ capitalization hitting U.S. $30 billion are still fresh, but large Russian investors did not dare to buy it this fall when it was valued at $7 billion.

“The stock market investors are waiting for a signal from a large buyer when it becomes clear how the company is valued. Now the only clear signal is the unwillingness of the shareholders of Yandex N.V. (Yandex’s Dutch parent firm) to agree with a $5 billion valuation,” Delitsyn told PRIME.

The analysts said VK benefits from transformation of the online advertising market and the retreat of the foreign social networks from the country. VK owns the local leading networks – VKontakte and Odnoklassniki.

VK’s ordinary shares advanced by 29.7% since the beginning of 2023 and closed at 566 rubles on December 15.

Puchkaryov at BCS said the company failed to disclose the margin in 2023 making it harder to value the business. “A wider disclosure of information and margin reporting will contribute to a positive share revaluation. If the market sentiment improves, the shares may step up to 580–640 rubles till the end of the year,” he said.

Cifra Broker analyst Anna Buylakova said that VK is a growing company and pays no dividends, “such stories are more sensitive to higher borrowing costs and stock market turbulence. The 12-month price target is seen at 800 rubles.”

“Ozon’s investment case is interesting for the investors because it is a growth stock on the Russian market,” she said.

The marketplace’s depositary receipts spiked by 85.5% since the beginning of the year and closed at 2,603.50 rubles on December 15.

“The marketplace aggressively boosts its gross merchandize value thanks to developing its logistics capacities and presence in the regions as well as growing loyalty of the current clients, which, in its turn, attracts more sellers and translates into higher marketplace and fulfilment commissions, as well as into revenue from related services, like fintech and advertising, that tend to have higher margins,” Buylakova told PRIME.

She sees the receipts’ 12-month price target at 3,300 rubles.

“For the investors, Ozon encapsulates the whole national e-commerce while there are no signs of forthcoming IPOs of other online stores so far. Ozon will witness no alternatives on our stock market for at least about six months. Our price target is 3,055 rubles with a Hold recommendation,” Delitsyn at Finam said.

Puchkaryov at BCS said while Ozon now runs at a net loss given active investment and development, it will gradually focus on higher margin as it grows.

“We are moderately positive about the stock. If the market sentiment improves, the receipts may rise to 2,650–3,000 rubles by the end of the year,” the analyst said.

(89.6966 rubles – U.S. $1)

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