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Yahoo! Earnings to Highlight Mobile, Advertising Growth

NEW YORK ( TheStreet) -- Yahoo! (YHOO - Get Report) reports first-quarter earnings after the close of trading. Wall Street will be looking to see whether CEO Marissa Mayer has indeed turned the core business around, as expectations are higher than they've been in some time for the Sunnyvale, Calif.-based Internet giant.

Since taking over Yahoo! in July 2012, Mayer has changed the perception of Yahoo! from a bumbling Internet company with no strategy to one where a strategy is starting to take shape, albeit slowly. Mayer is keen to focus on the company's mobile strategy, beefing up its apps, including Yahoo! Sports, Yahoo! Finance and others, and making acqui-hires, such as the recent Summly purchase to support this view.

Recent speculation has focused on Yahoo! partnering with hardware companies, namely Apple (AAPL - Get Report), as Mayer seeks to focus on building Yahoo!'s mobile initiatives to a strength. In the past, she's said this is an important initiative for Yahoo!, as the company does not have its own operating system. "With any platform shift, revenue always follows users, and Mobile will be no different," Mayer said on Yahoo!'s fourth-quarter earnings call. "Smart monetization of this usage is inevitable. We intend to participate fully in the innovation and experimentation required to make Mobile a material part of our business."

Mayer has managed to turn Yahoo!'s core business (display and advertising) around, as the company showed revenue growth for the first time in four years last quarter, and analysts will be looking to see if that trend continues.

Video monetization is a huge part of this, as the company tries monetize its nearly 700 million viewers per month. Wells Fargo analyst Peter Stabler notes that video is important for Yahoo! to keep advertising growth moving in the right direction for Yahoo!.

"While we believe video remains a small contributor to Yahoo! display revenue, we believe video focus is critical to capitalize on next leg of display advertising growth from large spending categories lacking natural search or e-commerce directive (read CPG, personal care, household goods)," Stabler penned in his note. He rates shares "market perform," with a valuation range of $24 to $25.

Analysts polled by Thomson Reuters expect Yahoo! to earn 24 cents per share on $1.099 billion in revenue for the first quarter. The consensus estimate from Estimize calls for 26 cents per share on $1.11 billion in revenue.

In a research note, BGC Partners analyst Collin Gillis is looking to see if the recent sales force changes will affect display advertising revenue. "While we understand the renewed enthusiasm for Yahoo's 24% stake in Alibaba Group and its upwardly spiraling valuation, we expect the earnings report to return the focus to the core business and the degree of traction in the turnaround effort," Gillis wrote in his note. He rates shares "hold," with a $21 price target.

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