Why Yahoo! Inc. (YHOO) Shares Netted Big Gains

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

Yahoo! Inc. (YHOO)What: Shares of search engine Yahoo! Inc. (NASDAQ:YHOO) vaulted higher by as much as 11% after the company posted a better-than-expected second-quarter profit.

So what: Unfortunately for investors, today’s earnings report isn’t as cut-and-dried as “Yahoo! beats.” In fact, it was a very mixed report, with Yahoo! Inc. (NASDAQ:YHOO)’s core ad business falling yet again, all while digital ad sales are growing in the U.S. by double digits. For the quarter, Yahoo! reported a slight drop in revenue to $1.07 billion, which was below the Street’s expectations, but delivered 46% net income growth from cost-cutting measures that drove adjusted EPS to $0.35, $0.05 better than expected. On the downside, Yahoo! Inc. (NASDAQ:YHOO) also lowered its full-year revenue forecast to a range of $4.45 billion to $4.55 billion from its previous forecast that called for $4.5 billion to $4.6 billion in revenue.

Now what: The real driver appears to be the strong growth at Alibaba, of which Yahoo! still holds a 24% stake. Expected to IPO sometime in 2014, some analysts have boosted their perceived valued of Alibaba to as high as $120 billion, which would translate into nearly $30 billion in value for Yahoo! Inc. (NASDAQ:YHOO) In the meantime, Yahoo!’s ad business is continuing its downward spiral despite CEO Marissa Mayer’s best efforts to make small, but earnings accretive, acquisitions. Despite the promise that Alibaba is showing, I have to question whether Yahoo! Inc. (NASDAQ:YHOO) has anything left in the tank other than its Alibaba investment. As of now, I wouldn’t say I’m all too impressed.

The article Why Yahoo! Shares Netted Big Gains originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!