Yandex: The Google of Russia

This leading Internet search company is growing at twice the speed of its US competitor.

By TheStockAdvisors May 2, 2012 12:23PM
By Timothy Lutts, Cabot Market Letter

Yandex (YNDX) is the leading search engine in Russia and therefore has earned the right to be called "The Google of Russia."

The first contextual advertising appeared on the site in 1998, the year Google (GOOG) was founded. In 2000, Yandex became a stand-alone company. And in every year since then, the company's revenues have grown. In most years, its share of the Russian search market has grown, too; currently, Yandex's market share is around 60%. Google is in second place, with a Russian market share of 26%.

According to Yandex, the company's advantages over Google are several. First, it has native knowledge of Russian language morphology. Second, it has first-mover advantage; Google didn't enter the Russian market until 2006.  Third, Yandex considers not just the source country of a search but the source city. And fourth, Yandex in 2009 launched its Matrixnet search platform, which analyzes not just hundreds, but thousands of factors.

Like Google, Yandex is doing much more than search. It also offers Yandex.News, Yandex.Market, Yandex.Mail and Yandex.Maps. It offers a Russian-to-English and English-to-Russian keyboard layout switcher.

It runs Yandex Labs in the San Francisco Bay area, "to foster innovation in search and advertising technology."  It also offers a player of free legal music.

It has an English-language search engine and photo-sharing and professional networking services similar to Flickr and LinkedIn.

And the company also operates in Ukraine, Kazakhstan, Belarus and Turkey -- and has been gaining share in each country during the past couple of years.

Finally, there's Yandex.Money, which is similar to PayPal, and is the largest electronic payment system in Russia. Yandex recently launched a debit card tied to Yandex.Money.

Advertising accounted for 98% of revenues, and brought an after-tax profit margin of 33%. Sales and earnings growth have been great for many years.

Possibly the biggest potential pothole is the country Yandex operates in; Russia does not exactly have a reputation for being investor-friendly, with oligarchs and old school politics generally ruling the roost.

YNDX went public in May 2011. The offering price was $25; the stock peaked at $42 that day. Seven months and a big market slide later, it bottomed at $17.

The company just reported good first-quarter growth; revenues were up 51%. But its market share slipped a bit, and nervous investors used that as an excuse to sell.

We're looking beyond that, however. The main attraction for us is that Yandex is growing at twice the speed of giant Google, and institutional investment in the company is still modest, so there's plenty of potential buying power out there. We think this represents a decent buying opportunity.

Related Articles

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123
123 rated 1
262
262 rated 2
480
480 rated 3
651
651 rated 4
649
649 rated 5
629
629 rated 6
616
616 rated 7
496
496 rated 8
346
346 rated 9
111
111 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
EXCEXELON CORPORATION9
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.