FOCUS: Yandex likely to perform stronger in 2021, stock to rise

By Yekaterina Yezhova

MOSCOW, Mar 1 (PRIME) -- After the disclosure of solid October–December financial results, analysts expect Russian Internet company Yandex to perform even better in 2021 as the COVID impact will fade away and its stock to rise further.

“There was a rise in the number of coronavirus infections and a new wave of the pandemic at the end of the year, which was naturally reflected in the results. However, the company showed better year-over-year margins in all the segments but Yandex.Market. Revenue growth was also sustainable and demonstrated that even with the second wave the markets continued to recover,” investment company Veles Capital analyst Artyom Mikhailin told PRIME.

Yandex’s total revenue, which consolidates the Yandex.Market financial results since July 24, advanced by 39% on the year to 71.599 billion rubles in October–December and by 24% in 2020 to 218.344 billion rubles.

Mikhailin underlined impressive growth in the cloud computing business, food delivery, and subscription service Yandex.Plus, as well as media projects. “Subscription becomes an important element of the ecosystem, and we can say that its launch was a right step of the management,” he said.

“Yandex.Market’s sales growth missed our outlook, but it can be explained by a transfer to the same platform with a price-comparing service and quitting brand Beru. The process took place during the year’s hottest season. Investment will improve Yandex.Market’s results gradually, and, like the management said, sales soared by more than 100% on the year at the beginning of 2021.”

The two pillars of Yandex’s revenue were online advertising revenue and revenue related to the taxi segment, which includes the ride-hailing, logistics and foodtech businesses as well as Yandex.Drive, a car-sharing business.

Total online advertising revenue increased by 12% to 38.402 billion rubles in October–December and by 4% to 126.450 billion rubles in 2020. The taxi segment revenue jumped by 50% to 21.645 billion rubles in the fourth quarter and by 47% to 66.955 billion rubles in the full year.

“The increase of revenues related to the taxi segment was attributed to the growth of our foodtech businesses, driven by our hyperlocal grocery delivery service, Yandex.Lavka, and the strong performance of Yandex.Eats business, as well as to the growth of ride-hailing and logistics businesses, and our corporate taxi business, the revenues of which we recognize on a gross basis,” the company said in its report.

Georgy Vashchenko, head of deals on the Russian stock market at investment company Freedom Finance, said that the taxi segment demonstrates high sales growth. “The pandemic helped things a lot because it drives demand for individual transport, food delivery, and others higher. We think the trend will stay in force in January–March,” he said in a research note.

He expects January–March revenue at 75 billion rubles with the annual figure exceeding 310 billion rubles. The first quarter EBITDA could amount to 18.6 billion rubles.

Yandex’s adjusted EBITDA added 6% to 14.040 billion rubles in October–December and lost 2% in 2020 to 49.762 billion rubles.

The company expects its 2021 revenue from 305 to 320 billion rubles “assuming no further escalation of the coronavirus pandemic and gradual improvement of the situation from the second quarter”. “The growth will be primarily driven by an acceleration of revenue dynamic across our e-commerce businesses – Yandex.Market, Lavka, and grocery part of Yandex.Eats – as well as recovery in search and portal and ride-hailing segments,” Yandex said.

Mikhailin at Veles Capital said the company’s outlook is still quite conservative and he expects it would be improved as the COVID impact shrinks. “We think all the core segments of the business will continue rising with the biggest absolute effect coming from the taxi segment. We’re waiting for the news about financial services of the company,” he told PRIME.

Yandex’s quotes eased 4.1% since the beginning of the year in Moscow to 4,944.80 rubles on February 25 and 7% in New York to U.S. $64.72 amid technical correction after a sweeping rally, the analysts said.

Mikhailin set the 12-month target price at 5,378 rubles and investment company VTB Capital equities analyst Vladimir Bespalov put it at $87.

(74.4373 rubles – U.S. $1)

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