SUNNYVALE, California — Yahoo’s shares rose as much as nine percent in heavy trading on Wednesday, a day after Chinese internet company Alibaba, in which it holds a 24 percent stake, reported a surge in quarterly revenue.
At least nine brokerages raised their price targets on Yahoo’s shares ahead of Alibaba’s IPO filing, expected next week.
The share, up 5.5 percent at $36.10 in early trading, was the most heavily traded stock on the Nasdaq.
Topeka Capital Markets analyst Victor Anthony in a note:
“We continue to recommend aggressive purchase of (Yahoo’s) shares ahead of the Alibaba IPO.”
Alibaba, which reported a 66 percent rise in fourth-quarter revenue, is expected to file prospectus for the share sale as early as Monday, according to sources.
The IPO is being billed as the largest in the United States since Facebook’s 2012 market debut and it is the most awaited IPO in what’s expected to be a record year for U.S. tech debuts after Twitter’s successful 2012 IPO.
Alibaba’s impressive performance overshadowed Yahoo’s anemic revenue growth in the first quarter.
Analysts were positive on growth in Yahoo’s core display and search advertisement revenue as the company continues to invest heavily in mobile, social, video and native advertising products.
Yahoo’s display ad revenue grew for the first time in over a year, while search revenue rose for the ninth straight quarter.
Speculation about Alibaba’s valuation has reached a fever pitch, with some brokerages pegging it as high as $190 million. This sets Yahoo up for a huge windfall when it eventually sells its Alibaba stake.
CRT Capital analyst Neil Doshi:
“The potential prospects of an Alibaba IPO are the chief motivation for our buy recommendation, but our positive view on shares is also supported by our increasing confidence in the core YHOO operation.”
Yahoo could benefit if it is able to liquidate its Alibaba stake in a tax-efficient manner, according to Wells Fargo analyst Peter Stabler
Wells Fargo raised its rating on Yahoo’s stock to “outperform” from “market perform”.
Yahoo’s shares have jumped about 50 percent in the past year as CEO Marissa Mayer continues with her turnaround plan.