Yahoo Gains as Alibaba Prepares to Say ‘Open Sesame’ to Market

Jacob Harper  |

Yahoo! Inc (YHOO) released earnings on April 16, and the company once again trumped expectations, sending shares up sharply in early market action. The positive earnings report comes on the heels of a highly anticipated tech IPO, the forthcoming public offering of the giant Chinese tech company Alibaba of which Yahoo is a major stakeholders.

Informally referred to Stateside as “China’s Amazon (AMZN) ,” Alibaba is a megaforce in China, and in its most earnings call reported revenues of $3.06 billion with an astounding net income of $1.4 billion. While Alibaba’s exact market valuation has yet to be quantified, experts peg their worth at at least $150 billion, of which Yahoo owns a 24 percent stake.

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What Yahoo lacks in hipness it has more than made up for in sheer volume, profitability, and smart acquisitions. Much credit must given to CEO Marissa Mayer, who both oversaw Yahoo’s takeover of popular blogging platform Tumblr and subsequent besting of Google Inc. (GOOG) to become the most popular web company by unique pageviews in the world.

However, the purchase of the 24 percent stake in Alibaba was engineered by Mayer’s predecessor, Yahoo co-founder Jerry Yang. And that move could end up being Yahoo’s smartest acquisition of all. Yang paid $1 billion for the stake, which has reaped many times over that already in enterprise revenue. And the company hasn’t even gone public yet.

While Alibaba has yet to announce a date for their debut on the American stock market, they have announced that the paperwork has been officially filed. And when it does occur it is expected to raise at least $16 billion that first day, making it the largest tech IPO in history – and another big win for the perennially uncool yet now perennially profitable Yahoo.

For their Q1 20143 earnings, Yahoo reported a net gain of $183 million, or $0.38 per share, versus the net profit of $30 million, or $0.35 per share, from the same period a year ago. Revenue for the quarter was $1.087 billion, as compared to $1.14 billion from the previous year. Analysts were expecting a profit of $0.37 per share on revenues of $1.079 billion.

Yahoo was up on the slight earnings beat, gaining 5.67 by midday to hit $26.17 a share.

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