The Yahoo! Inc. (NASDAQ:YHOO) earnings report due to be released on Tuesday afternoon will likely neglect the company’s own prospects. This time around investors will be more interested in the valuation of Alibaba, the company’s part-owned Chinese internet business. Core strength is still important at Yahoo, however, and it will dominate analysis in the days after the release of the report.
Analysts following Yahoo! Inc. (NASDAQ:YHOO) are looking for earnings of 33 cents per share from the company’s third quarter. Revenue for the same period is expected to come in at $1.1 billion by consensus. In the same three months of 2012 Yahoo earned 35 cents per share on revenue of $1.1 billion. Yahoo doesn’t seem to be strengthening all that much, but the value of Alibaba makes up for that.
The value of Yahoo! Inc. (NASDAQ:YHOO) is being driven by its Chinese subsidiary right now. Alibaba’s IPO will bring in a huge amount of cash at Yahoo, allowing it to buy back a large amount of shares, make large acquisitions and invest in new ideas. Nobody seems quite certain what those ideas might be just yet.
CEO Marissa Mayer has managed to turn the company around to a great extent. The firm is no longer losing business every month, and earnings are growing year to year. Stabilization of the firm’s core business has done a great deal to improve sentiment around Yahoo! Inc. (NASDAQ:YHOO), but it won’t save the company.
Once the Alibaba IPO is announced and investors know how much cash Yahoo! Inc. (NASDAQ:YHOO) will get its hands on next year, they will have to look at the business itself. Shares have gained around 70% through 2013, but that value is based on Alibaba and a great deal of hope.
Yahoo after Alibaba
After Alibaba becomes a separate company Yahoo! Inc. (NASDAQ:YHOO) will have to evolve. The firm has announced many vague exciting plans and it’s been involved in a number of acquisitions, including the $1 billion Tumblr deal. Yahoo is by no means dying, but it is struggling.
That struggle will continue until the company unveils something that can excite users. Yahoo! (NASDAQ:YHOO) is dealing with a dominant Google Inc (NASDAQ:GOOG), and a rapidly expanding Facebook Inc (NASDAQ:FB). The company will not have an easy time in the wake of the Alibaba deal.