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Yahoo Stock Hits Five-Year High Despite Mixed Analyst Reviews for Earnings

Marissa Mayer Headshot - P 2013
Getty Images
Yahoo CEO Marissa Mayer

UPDATED: Most laud strength at Chinese site Alibaba, in which the company, led by CEO Marissa Mayer, owns a stake, but highlight continued revenue weakness.

Yahoo's second-quarter earnings report late Tuesday drew mixed reviews from Wall Street on Wednesday, but the stock still hit a multi-year high.

In early trading, Yahoo shares rose as high as $28.91, well above a previous 52-week high of $27.68 that the stock hit in May. According to Bloomberg News, the price hit on Wednesday was the stock's highest since May of 2008.

As of noon, Yahoo's stock was up 7.2 percent at $28.82.

"Traffic First, Revenue Later," Credit Suisse analyst Stephen Ju said in the title of a post-earnings report, "The First Encouraging Sign."
 
Like others, he highlighted continuing declines in revenue. "Yahoo reported mixed second-quarter results with net revenues below our estimates," Ju said. "In-line search revenue was offset by a weak display [revenue] result."

Overall, he maintained his "neutral" stock rating and $23 target price.
 
"Similar to prior quarters reports, CEO Marissa Mayer reiterated the overall strategy, which focused on mobile, personalization as well as the re-architecting of Yahoo's search and display businesses," Ju said. "Incremental details on the product release roadmap were not offered, but we were, however, encouraged to see overall traffic levels return to growth in June, which should serve as a first fledgling sign of a turnaround."

Many Wall Street observers highlighted the strength at Chinese e-commerce giant Alibaba.

"Ya-Who?" Pivotal Research Group analyst Brian Wieser entitled his report. "Weaker-than-expected operating results were far less important than the additional data related to Alibaba," he wrote.

He added: "We continue to assess Alibaba with a mix of optimism and conservatism given the absence of underlying insight informing investors more fully about revenue growth and profitability improvement."

He maintained his "hold" rating and $27 price target on Yahoo's stock.

Stifel, Nicolaus analyst Jordan Rohan, who has a "buy" rating on the stock, used a similar title for his report: "Alibaba Triples Profit; Yahoo Reported Too."

"We believe Yahoo shares will increase due to the very impressive profitability of Alibaba Group, in which Yahoo retains a 24 percent stake," he predicted. "Upside from Yahoo's stake in Alibaba helped to drive upside to earnings per share."

But he highlighted that management lowered guidance for Yahoo's core operations "driven by disappointing performance in display advertising and incremental expenses from acquisitions, including Tumblr."

Cowen & Co. analyst John Blackledge, meanwhile, maintained his "market perform" rating on Yahoo's stock with a $26 price target.

He reduced his 2013 estimates for revenue and other metrics modestly. But for annual earnings per share, he raised his forecast to $1.39 from $1.34, citing "higher equity income from fast-growing Alibaba."

E-mail: Georg.SzalaI@THR.com
Twitter: @georgszalai