Yahoo!'s Shut Us Up... For Now

First-quarter guidance was a little conservative, though it's clear that Yahoo!'s headed in the right direction, albeit slowly. For the first quarter, Yahoo! expects to generate between $1.07 billion and $1.1 billion in revenue. "On a fundamental level, Yahoo! still has significant room to improve and while some trends in search have been encouraging, display, which we continue to view as the most important segment at Yahoo!, remains disappointing and trends worsened in Q4," wrote Piper Jaffray analyst Gene Munster in a research note. Munster believes Yahoo!'s stock may react positively over the next few months, but the fundamental story is lagging behind the share price. He rates Yahoo! "neutral" with a $21 price target.

Executing a Yahoo! turnaround is not an easy task for Mayer. She had no previous experience of turning round a company as big as Yahoo! I believed she was the wrong choice for the job, when she joined Yahoo! from Google. Since taking over in July, Yahoo! has been able to monetize some of its Asian assets (part of its Alibaba stake), returned some of that cash to shareholders in the form of a buyback, and still has a lot of dry powder left for tuck-in acquisitions and research and development.

Yahoo! ended the quarter with $6 billion in cash and cash equivalents, aided by the partial sale of its Alibaba stake. During the quarter, Yahoo! bought back 80 million shares for $1.5 billion.

Mayer identified four big keys to monetization: search, display, mobile and video. On the call, she noted video is the hottest part of the business, with some advertising sold six months in advance, but said that mobile is where she intends to really focus. If Mayer hopes to compete with the likes of Google, Facebook (FB) and others for mobile eyeballs, she certainly has her work cut out.

By no means should Mayer take a victory lap - she's only been at the helm for one full quarter, and the company still has plenty of work left to do. Key initiatives include continuing to monetize Yahoo!'s Asian assets (Yahoo! Japan and Alibaba), and becoming relevant again for domestic advertisers and consumers minds.

The company is still in a "show me state," but for now, Mayer and her team have silenced some of the critics, including me. We'll all be watching to see if there's more to this story.

Interested in more on Yahoo!? See TheStreet Ratings' report card for this stock.

--Written by Chris Ciaccia in New York

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