Yandex - Yet Another Upgrade

We reiterate our BUY rating on Yandex while raising our ruble-denominated target price by 17% to R5,958 per share, or $80.52 per US-listed share.> E-commerce ambitions. Yandex reported that its e-commerce GMV tripled last year to R56 bln (out of that we estimate the marketplace GMV increased 2.3-fold to R42 bln versus 2.4-fold growth for Ozon to R195 bln and a doubling for Wildberries to R437 bln). On top of that its price comparison platform saw GMV sales of R230 bln. Yandex voiced aggressive plans to invest $400-500 mln in its e-commerce segments in 2021, with the ambitions of becoming a top-three player. The company thinks it has a good base for this, with 25k merchants on the Yandex.Market price comparison platform, 8 mln Yandex.Plus subscribers, 30 mln transacting customers and 20 mln customers in Yandex.Lavka's coverage area. > Valuation. A repricing of Yandex.Market following the IPO of Ozon contributed about a quarter of the increase to our dollar target price. A change in our FX assumption (from USD/RUB 77 to 74) and update of our Yandex.Taxi JV model each contributed another 20%, while the rest (around 36%) came from our updated outlook for the search and portal, media and classifieds verticals. Yandex shares are trading at a 27.6 2021E EV/EBITDA (17 for 2022E) and 47 2021E P/E (27 for 2022E). On our estimates, excluding the Yandex.Taxi JV and Yandex.Market the shares are trading at a 17 2021E EV/EBITDA, while excluding just Yandex.Market (8.5% of the target price, shaves 18% from adjusted EBITDA in 2021E) they are trading at a 21 2021E EV/EBITDA. > Catalysts. We believe that a deal to buy Uber out of the Yandex.Taxi JV is imminent and see it as a potential catalyst. We believe that Yandex's recent statement regarding its e-commerce plans, which suggest tight integration between Yandex.Market, Yandex.Eats, Yandex.Lavka and the logistics vertical (the last three are part of the Yandex.Taxi JV), indicates that the deal might happen sooner rather than later. Other possible catalysts include details on an upcoming fintech offering; crystallization of value in the self-driving group, possibly through a deal; achieving the scale in the cloud business that would allow for a price tag to be attached to it.> Risks. We suggest keeping an eye on how the pandemic situation evolves in Russia; how successful Yandex's planned investments in e-commerce turn out to be (given that there are already successful incumbents in the space, along with ambitious, well-funded new entrants); any potential regulatory changes (although at this stage are not aware any that could adversely affect Yandex's fundamentals).