Yahoo! Fans Expect to See Fireworks

Cresting? Yahoo! wave subsides

The question facing Yahoo! analysts is whether this new brand of less-giddy, more-staid optimism is still too optimistic nonetheless.

Yahoo!'s shares fell 96 cents Tuesday to trade at $32.98. Despite the pullback from last week's highs, that's still 36% over where the stock was trading before the first-quarter results prompted this latest surge in Yahoo!'s stock.

For this quarter, the Thomson First Call expectation is that Yahoo! will report earnings of 8 cents per share on revenue of $610 million. As is the custom among Yahoo! and its analysts, that headline revenue number excludes traffic acquisition costs paid by Yahoo!'s subsidiary Overture Services. That's the ad revenue that Overture shares with third-party Web sites for the privilege of running Overture's pay-per-click search engine results.

The First Call mean estimate for earnings before interest, taxes, depreciation and amortization (or EBITDA) -- also known as operating income before depreciation and amortization (or OIBDA) -- is $224.5 million for the quarter ended June 30.

For the full year, the expectations are for $2.53 billion in revenue, 33 cents in earnings per share and OIBDA of $956 million.

Typical of the lower-profile caution about Yahoo!'s valuation is a report issued Tuesday morning by Mark Mahaney of American Technology Research. In the wake of Yahoo!'s close at $33.94 Friday, Mahaney wrote, "Here we are at $34, knocking on our $34.50 price target ... and we would not be buying these shares into the numbers. We would look to be more opportunistic, looking to add to a core YHOO Long position closer to $30." Mahaney has a buy rating on Yahoo!'s stock.

Not much more optimistic than Baker is J.P. Morgan analyst Imran Khan, who has a buy rating and a $37 price target.

As far as further stock appreciation is concerned, one of the most optimistic Yahoo! analysts appears to be Credit Suisse First Boston's Heath Terry. In a June 22 report entitled "Up 40% and Undervalued," Terry argues that online advertising is growing faster than expected, driven by a quicker-than-expected pricing increase for traditional online advertising and a slower-than-expected deceleration in the search business.