Alibaba powers upgrades at Yahoo

Yahoo shares surged 8 per cent to a new five-year high on Wednesday, as investors ignored the Web portal’s struggling business and cheered the strong performance of its investment in Alibaba Group.

The Chinese e-commerce giant, in which Yahoo owns a 24 per cent stake, nearly tripled its net income in the first three months of the year and increased its revenue by 71 per cent.

Yahoo did not provide any details about what was responsible for the strong performance of the privately-held Alibaba Group, which is widely expected to have a public offering later this year or next year.

Yahoo’s earnings report includes Alibaba’s financial results from the previous quarter. Alibaba’s first quarter results stood in sharp contrast to Yahoo’s own performance during the second quarter, with the Web portal reporting stagnant revenue and a sharp decline in prices for its display ads.

Wall Street’s focus on Alibaba rather than on Yahoo was reflected in the slew of analyst notes published following Yahoo’s earnings, including Stifel Nicolaus’ Jordan Rohan whose note to investors was titled: “Alibaba triples profit; Yahoo reported too.”

“We continue to think that the defining factor for Yahoo stock is the value of Alibaba,” Bernstein Research analyst Carlos Kirjner said in a note.

Shares of Yahoo were trading at US$29.05 at midday on Wednesday.