Yahoo! Inc. (NASDAQ:GOOG) surged more than 6% to $36.35 per share today following its solid earnings results yesterday. Investors are showing optimism regarding signs that the company is growing, and they are particularly positive with its 24% stake in Alibaba Group Holdings Limited.
Earnings results
For the first quarter of the current fiscal year, Yahoo! Inc. (NASDAQ:YHOO) $0.38 earnings per share on $1.09 billion revenue, which is higher than the consensus estimate of $0.37 earnings per diluted share on $1.08 billion revenue.
According to the company, its display revenue ex-TAC increased 2% to $409 million and the number of ads sold rose 7% during the quarter. Yahoo! Inc. (NASDAQ:YHOO) said its price-per-ad fell 5%. Its search revenue ex-TAC increased 9% to $444 million. The company said its paid clicks and price-per-click climbed 6% and 8%, respectively.
Yahoo! Inc. (NASDAQ:YHOO) ended the quarter with $4.6 billion cash, cash equivalents, and investments. The company bought back 12 million of its own shares for $450 million.
Yahoo stock lifted by Alibaba
Analysts opined that the positive momentum of the shares of Yahoo! Inc. (NASDAQ:YHOO) is not connected to the performance of its core business, instead it was lifted by Alibaba Group’s financial performance.
The company reported that the sales of Alibaba Group surged 66% to $3.06 billion while its profit climbed 110% to $1.36 billion in the fourth quarter last year.
Cantor Fitzgerald analyst Youssef Squali believed, “Prospects for an imminent Alibaba IPO and further buyback should continue to support the stock, in our view.” He recommended a Buy rating for the shares of Yahoo! Inc (NASDAQ:YHOO) and raised his price target for the stock to $42 a share because of the strong financial results of Alibaba Group. Squali valued that core operations of Yahoo for only $6 per share, thus the Alibaba represents more than 50% of its market capitalization.
On the other hand, Ben Schachter, an analyst at Macquarie Securities USA commented, “The core turnaround remains uncertain, but we don’t think it will matter much for the stock in the near term” citing that Alibaba will remain a factor for Yahoo! Inc. (NASDAQ:YHOO). He has a Buy rating for the stock.
