October 8, 2014 at 16:01Why stocks of Yandex and Mail.ru are getting cheaper and what does it mean
Since the beginning of 2014, the Russian RTS stock index fell by 14% to 1,120.2 points. At the same time, the shares of Russian technological giants Yandex and Mail.Ru Group fell in price much more - securities of these issuers fell by 35% and 37%, respectively. Analysts interviewed by RBC reporters said that such a decline could be due to external factors.
Is there any reason to buy shares in these companies under current conditions, and if so, how to do it?
Steep peak
In early January, Yandex shares on the NASDAQ American stock exchange were worth $ 42.63 per share, in the fall (data on Friday, October 3), the price did not exceed $ 27.67 - over the nine months of this year, the price reduction was about 35%. During the same time, the capitalization of the Russian search giant decreased by $ 4.8 billion and amounted to $ 8.883 billion.
Mail.Ru is no better doing business - the holding has lost $ 3.4 billion of capitalization and this time it is valued at $ 5.855 billion. The shares of this company are traded on the London Stock Exchange - in early January, the price for one paper there was $ 44.22, and on October 3 - already $ 28. This means that the price has fallen by about 37%.
From January to October 2014, the Russian RTS stock index lost 14% - analysts indicate that a comparison with this index makes sense, since it is calculated in US dollars and the securities of Russian technology giants are traded in that currency.
The RTS Index takes into account the performance of 50 large companies from different sectors, including the real sector - LUKOIL, Gazprom, Uralkali. Another index with which it makes sense to compare quotes - the Nasdaq - grew during the period from January to September by 7%.
Fundamental indicators
According to the reporting for the first half of 2014, the revenue of Internet companies increased - Yandex was able to increase it by 34% (23 billion rubles), while Mail.ru revenue grew by 22% (15.1 billion). Yandex analysts consider the Yandex performance to be good, but Mail.Ru Group’s growth was not fast enough. Both companies depend on the state of the advertising market, since it is advertising that brings them significant revenue.
Yandex depends on advertising revenue almost entirely (99% of revenue), Mail.Ru receives 31% of its revenue. According to experts of the advertising market, in particular, the Association of Communication Agencies of Russia, the costs of online advertising in Runet increased - in the first half of the year, growth amounted to 20% to 38 billion rubles. Thus, Yandex grew faster than the market, while Mail.Ru lagged behind it, experts say RBC. At the same time, both companies recorded a drop in revenue from banner advertising - Yandex lost 6% of revenue, and Mail.Ru - 10%. The organization explained this fact by the unfavorable economic and geopolitical situation.
The acquisitions made by companies in 2014 had practically no effect on their capitalization - Yandex bought Auto.ru for $ 175 million, as well as AdFox, PriceLabs, Parascript services. Mail.Ru, in turn, managed to concentrate in its own hands the management of the largest Russian social network VKontakte, having bought its 48% stake from the UCP fund - after the announcement of the transaction, Mail.Ru shares went up only 3% to $ 30.9 apiece .
The drop in quotations was explained not only by common reasons for all Russian companies - a recession in the economy, an unfavorable political situation - but also by investors' concerns about a possible tightening of control over the Runet. After the adoption of amendments to the law “On Information” (the law on bloggers), as well as statements by politicians (including the President of Russia) that “the Internet was thought of as a special project of the CIA”, the value of shares of Internet companies was reduced.
After it became known about the consultations on disconnecting the Russian segment of the network from the global Internet “in a critical situation”, the shares of technologically giants also sank in price - despite the assurances of politicians that they did not want to restrict access to the network, Yandex lost 5% of the value of shares - the price dropped to $ 26.45 apiece, and Mail.Ru shares depreciated by 4% (to $ 26.99).
Do I need to buy, and how to do it
Analysts interviewed by RBC say that usually the reaction of the stock market to negative news from Russia does not last longer than a week - after the "drawdown", the stock price is restored. Those investors who have already bought Yandex shares and Mail.Ru are not recommended to get rid of securities - Mail.Ru shares are advised to acquire and keep Yandex securities.
The chief economist of ITinvest Sergey Egishyants does not agree with the calculation method in the RBC material:
In the RBC material, comparisons are incorrect in principle - they compare dollar indices and dollar prices of stocks of firms, and then they say about expanding the business based on ruble indicators: but what is the point if the dollar-ruble has already grown by more than 20% since the beginning of the year?
If companies generate revenues and profits in rubles, then it is necessary to consider them - then the fall in stock prices will not be 37%, but only 23%. This is a lot, but not so scary. The same applies to the calculations for April and so on - just remember where our entire market (especially in dollars) and the accompanying political situation went then to stop seeing conspiracies where they are not there. Well, the fact that Russia is being sold this year is no secret (geopolitics is to blame); the fact that hi-tech usually falls (but also grows) faster than the market as a whole - also, so from general considerations nothing special happens.
You can buy Yandex shares in two ways - on the Nasdaq American Exchange, or on the Moscow Exchange. In the summer of 2014, the search giant conducted an additional public offering on the Russian stock exchange. In order to acquire securities on it, citizens need to carry out the following actions:
- Open an account with a brokerage company that provides access to the Moscow Exchange markets and has an appropriate license (such companies include ITinvest);
- By bank transfer or at the cash desk to deposit funds into this account;
- Install special trading software - a trading terminal - and use it to buy shares.
It is important to remember that for the implementation of operations on the stock market, the exchange and the broker charge a commission (exchange fees can be found on a separate page , in the rates on the ITinvest website both exchange and brokerage fees are taken into account ).
To acquire Yandex shares on Nasdaq and Mail.Ru on the London Stock Exchange (LSE), you also need to conclude an agreement with a broker, but in a specific country (this is not so easy to do). Some Russian brokers have partners in the US and the UK, which allows them to connect customers to trading on foreign exchanges.
In order to trade on these exchanges, you must either contact your local broker to open an account (which is not so easy to do), or find a Russian broker that provides access to trading. Shares of Yandex, which we are considering as an example today, are traded on NASDAQ, respectively, we will need a Russian broker who has access there.
In a situation where the network user does not want to become an investor in the full understanding of this word, but plans to purchase a single share of the technology company he is interested in (for example, Facebook), it is worth using the services of special intermediary sites that allow you to purchase one share at a market price without opening a brokerage account.
You can do this, for example, using services likeGiveAShare.com , OneShare.com or Uniquestockgift.com (shares of Russian companies are not present there). The buyer needs to select the company of interest and fill out a short form. Certificate of ownership can be “decorated” with a variety of frames or plates with engraving.
If you have a desire to buy stocks, it is always important to remember that actively trading them in order to extract speculative income without proper experience is quite dangerous - it’s better to pre-train on a test account with virtual money - on the Moscow Exchange a completely virtual stock market is implemented that is no different from of the present. It also trades Yandex virtual securities.
Attention!In ITinvest, a vacancy for the C # GUI developer has opened, the job is to implement front-end development of software products for trading on the exchange. Details are available at www.itinvest.ru/about/vacancies/programmer-gui-c .
PS If you notice a typo or error - write in a personal message, and we will quickly fix it.
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