SunTrust's Bob Peck Says It's Possible Yahoo Does Algo Search Itself

In a report published Monday, SunTrust Robinson Humphrey analyst Bob Peck noted that he remains focused on two key topics ahead of Yahoo! Inc. YHOO's first quarter results on Tuesday.

First, Peck noted that with basic information regarding a new Microsoft Corporation MSFT agreement already revealed, it is possible Yahoo will likely decide to do mobile algorithmic search on its own, as well as a portion of desktop. The analyst noted that Yahoo may have designs to grow its search capability, which could hike near-term spending by "several" hundred million dollars, though this could be accretive in the long run.

Second, Peck stated that Yahoo will likely provide additional information on its cost rationalization for 2015 and beyond as the company is "hyper focused" on costs and the structure of the company with the Alibaba Group Holding Ltd BABA separation nearing. The analyst added that Yahoo is also in a position to shed a "significant" amount of expenses by reducing its staff count by 15 percent.

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Peck also suggested that an update on Yahoo's key areas of MaVeNS (mobile, video, native and social), which grew at 100 percent in the fourth quarter, is expected.

Peck is estimating Yahoo will earn $0.15 in the first quarter on revenue of $1.042 billion. This compares to the Estimize Consensus earnings per share estimate of $0.20 and revenue estimate of $1.057 billion. The Wall Street Consensus estimate is calling for an earnings per share of $0.17 on revenue of $1.050 billion.

Shares remain Buy rated with a price target lowered to $59 from a previous $61.