Yahoo! Inc. (NASDAQ:YHOO) is scheduled to release its next earnings report on or around Oct. 15, but it isn’t necessarily the core numbers that matter most. Bernstein Research analysts say an update on what the company plans to do with the profits it has raked in from Alibaba Group Holding Ltd (NYSE:BABA)’s initial public offering.

What to expect in Yahoo’s earnings report

In a report dated Oct. 8, 2014, analyst Carlos Kirjner said he’s a little ahead of consensus estimates for third quarter revenue and core EBITDA but behind on earnings per share. He doesn’t think Yahoo’s core performance will improve, as the company has seen some big challenges in the last few years.

Yahoo Stock Still Hangs On Alibaba IPO

He notes that third quarter implied guidance indicates adjusted EBITDA margins that are about 760 basis points lower than they were in last year’s third quarter. Revenues excluding traffic acquisition costs could be 3.7% lower than last year.

The analyst estimates $1.06 billion in revenue, compared to the consensus estimate of $1.047 billion. He’s estimating $260 million in adjusted EBITDA, compared to the consensus estimate of $247 million, and non-GAAP earnings of 26 cents per share. The consensus estimate for earnings is 31 cents per share.

Investors care more about Alibaba

The analyst also said, however, that one of the biggest issues investors will have is whether or not Yahoo will hand over the value of what’s left of its stake in Alibaba to shareholders tax free and tax efficiently. Kirjner believes that if any of management’s comments on this topic suggest either way, it would be a big catalyst for the stock.

In his view, Yahoo! Inc. (NASDAQ:YHOO) shares are fairly valued if the company does not hand over any of that value to shareholders. However, he sees an upside of 20% to 30% if Yahoo does hand it over.

Valuing Yahoo’s Alibaba stake

He believes that after Alibaba Group Holding Ltd (NYSE:BABA)’s IPO, Yahoo owned approximately 384 million shares of Alibaba, which would be worth approximately $36 billion or $34 per Yahoo share. If it’s fully taxable but transferred to shareholders, the value drops to about $21 per Yahoo share.