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Why is Yahoo (YHOO) Stock up Today?

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Shares of Yahoo! Inc. stock were up 3.8% in mid-morning trading Thursday largely thanks to the company’s 15% stake in Alibaba (BABA - Free Report) , which had a strong Q2 earnings performance.

Alibaba posted earnings before market open, in which it beat Zacks Consensus Estimates. The company posted $0.52 in earnings per share (Excluding $0.08 in non-recurring items), and revenue of $4,838 million. These beat our estimates of $0.38 and $4,610 million respectively.

Yahoo first paid $1 billion for a 40 percent stake in Alibaba back in 2005, and sold half of that back to the company for $7.6 billion in September of 2012.  In late July, Yahoo agreed to sell its core internet business to Verizon Communications (VZ) for $4.8 billion. This leaves the company with its stakes in Alibaba and Yahoo! Japan.

Today’s stock movement put Yahoo near 52-week highs, although the company has had little other good news recently. However, it did announce a deal with Hulu to launch Yahoo View, a TV-watching website that will feature free content from Hulu.

At the moment, Yahoo is operating as little more than a trading vehicle for Alibaba. The company had planned to spin off its stake in Alibaba, but is not due to uncertainty from the IRS as to whether or not it could be carried out on a tax-free basis.

It’s difficult to create expectations for Yahoo’s future, as there is still doubt about how it can use its stakes and partnerships to derive revenue. The company’s deal with Verizon is expected to close in early 2017.

Yahoo has seen upward earnings estimate revisions for this quarter, up one cent to $0.07.

Yahoo! Inc. currently sits at a Zacks Rank #3 (Hold).

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