The Russian Alibaba?

Written by GSCR Staff   
Tuesday, 23 September 2014 06:49

It’s hard to ignore all the hype associated with any high profile IPO, and last Friday’s debut of Alibaba Group Holding Ltd. (NYSE – BABA) is no exception.

However, as we mentioned yesterday in the ‘Investing A to Z’ article in the Goldman Guide, you may want to hold off on BABA for the time being. Additionally, we mentioned our ‘Y’ stock was a tech play, Yandex N.V. (NASDAQ – YNDX - $28.74). While the stock price and market cap are a little out of our small cap world, there are a few reasons why putting some of your ‘rubles’ in this Russian stock might be a great idea.

 

First off, to avoid confusion, Yandex N.V. is headquartered in the Netherlands, not Russia, but serves primarily the Russian internet market along with other international markets. This is key macroeconomic consideration given some of the geopolitical issues currently surrounding Russia and the Ukraine. The Company offers a range of search, location-based, personalized, and mobile services that enable users to find information, and communicate and connect over the Internet from desktops and mobile devices and localized homepages for specific geographic markets. Consider Yandex the Yahoo! or Google, or more currently the Alibaba of Russia.

 

From a micro stock perspective YNDX is very attractive related to growth revenue and price metrics. A forward P/E under 1 awesome start, which is due to the Y-o-Y consensus revenues projected to grow at an astronomical rate from 2013. The gross and operating margins of 71% and 30% versus industry averages of 58% and 3% indicate a positive profit and efficiency story. Finally, the short float of just over 2% indicates there is not much appetite from the naysayers.

 

Now may be the time to buy YNDX on a relative dip. The stock has dropped 25% since early July but the technical analysis indicates a solid support level just below $28.50. There is every indication the stock could take off again, especially if there is a long term agreement reached in the Ukraine, and regain that lost 25% by the end of the year.

 

Have a great day!

 

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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