What Will Yahoo Do With All Of Its Cash?

"I think that's the biggest question on everybody's mind," B. Riley & Co. analyst Sameet Sinha told Benzinga.

Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, made similar remarks.

"The quarter is probably about one thing," Udall told Benzinga. "What are they going to do with the Alibaba money?"

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Buyback vs. Dividend vs. Tracking Stock

Udall said that while a buyback would be okay, there is one thing that could make the stock rise: a tracking stock.

"They have all these Asian assets," said Udall. "They have Alibaba, they have Yahoo Japan. Basically, more than 100 percent of the value of Yahoo is in the Asian assets and cash right now. The thing that Yahoo could do, which I think could mean five points to the stock (maybe 10 points), is spin out a tracking stock that basically shows the value of Alibaba and their Asian assets."

Udall dismissed the notion that "poor Yahoo" isn't a viable business. "It's not a growing business but it's a viable business," he added. "You've got another huge amount of money in cash. You've got $4-5 billion in revenue. At least if they did a tracking stock, the core Yahoo piece would be impossible to assign a negative value to it."

If Yahoo decided to issue a one-time dividend, Udall said that would be a "terrible decision."

"If they were to do a bunch more Tumblr-type deals, that would probably be terrible news for shareholders [as well]," Udall added.

Mergers? What Mergers!?

Activist investors recently pushed Yahoo to merge with SoftBank or AOL, but those discussions died down over the past few weeks.

"I don't know that there was more behind it than that," MKM Partners analyst Rob Sanderson told Benzinga. "You could make an argument why that would make sense. The core Yahoo business is not worth much or anything in the valuation of the stock. That's an asset that you're getting for free or little and that you're a believer in Alibaba, like SoftBank is, then that makes sense."

Sanderson referred to the activist push as an "academic exercise," which attempted to show the value of two entities that should come together.

"And there is!" Sanderson added. "Everyone knows that. There's value in the stock if they do aggressive repurchasing and they liquidate their investments in the Asian assets. You don't even have to turn around poor Yahoo, you just have to manage it for cash and you can make money in the stock."

Sanderson doesn't know if there's a "compelling story" on the core business. He said if they can just turn around the decline in display ad pricing, "then maybe there's upside."

"It's a strange setup," Sanderson added. "It's kind of a holding company. It's [primarily] dependent [on] what Alibaba's stock price does -- more than anything else."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.