Street Is All Ears On Yahoo Plan For Alibaba Windfall

At Yahoo Inc.'s

second-quarter conference call July 15, investors will be all ears to learn the company's plans for its upcoming $9 billion windfall from the initial public offering of Alibaba.com. Yahoo made a $1 billion investment in Alibaba in 2005 and although the China Internet concern has bought back much of that amount, Yahoo still holds more than a 22 percent stake. Yahoo's current market capitalization is $35 billion. Speculation ranges from a share buyback to going on a big acquisition binge. So far, Yahoo isn't saying. The pending windfall appears to be Yahoo's chief attraction to investors. Shares are down more than 13 percent in the year to date. Ho-hum second-quarter revenue growth of potentially 2 percent comes no where near 2014's expected gains in U.S. online advertising revenue of 13 percent. Yahoo's June site traffic fell 9 percent and its homepage traffic down 25 percent, according to Bank of America's Justin Post. Yahoo search use improved to up 4 percent after falling 3 percent in May. Yet S&P Capital's Scott Kessler maintains a Buy recommendation with a $45 target on Yahoo. The company's “new emphasis on focused operations and the allocation of resources will help profitability and growth,” Kessler said. In the April quarter Yahoo posted a sequential revenue decline of about 10 percent. Indeed, "the past number of years have been challenging" for Yahoo said Kessler, who predicts the company will post earnings of $0.35 cents a share for the second quarter. The Wall Street consensus calls for earnings of 38 cents a share, on revenue of $1.08 billion.