Updated from 10:39 a.m. ET to provide M&A news in the eleventh paragraph.
NEW YORK ( TheStreet) -- Yahoo!'s (YHOO - Get Report) second-quarter earnings report did nothing to immediately answer any of the questions about the core business. However, optimism continues to surround Marissa Mayer, and for shareholders, that's just fine for the time being.
The Sunnyvale, Calif.-based company reported earnings of 35 cents a share on $1.07 billion in revenue excluding traffic acquisition costs, as revenue fell 1% year-over-year. Though display revenue fell 11% year-over-year, there was a slight improvement in search revenue, which rose 5% over the same time frame to $403 million.
It appears that while there isn't an immediate bump in the overall numbers, the story is no longer as bleak as it once was. On the conference call, CEO Marissa Mayer said there is a "chain reaction to growth -- people, then products, then traffic, then revenue." She also noted that "pageview traffic achieved crossover in early June, and has grown year-over-year."Cantor Fitzgerald analyst Youssef Squali, who rates Yahoo! "buy," noted the stock continues to benefit from the increase in optimism surrounding the Asian assets (24% stake in Alibaba and 35% stake in Yahoo! Japan), but that the real turnaround may come in 2014. "Longerterm, however, the stock's performance will have to correlate with the turnaround in Yahoo!'s core business, which we won't have material visibility into until 2014," Squali wrote in the report. "YHOO remains a SOP story, with the Asian assets and cash amounting to ~$21.30/sh and a $1.9B buyback that should limit the downside." He lowered his price target to $29 from $30 following the results. The increase in Alibaba is especially important, as the Chinese Internet giant gets ready to go public. Oppenheimer analyst Jason Helfstein, who raised his price target to $33, notes the strong performance in Alibaba revenue continues to be a huge boon for Yahoo! "1Q Alibaba revenue increased 71% y/y, while operating income was 62% above our estimate on higher margins," Helfstein wrote in the note. "As a result, we now value Alibaba at $92B vs. $73B, previously." Yahoo!'s slowly starting to turn itself around, as Mayer noted the benefits of recently relaunched products, such as Flickr, Mail, Weather and other Yahoo! properties which have been overhauled in the last few months. The recent acquisition of Tumblr, which CFO Ken Goldman said will not provide any meaningful revenue this year, may start to affect the top line in 2014.