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Don't Give Up On Yahoo!'s Growth

NEW YORK (TheStreet) -- In January, Yahoo! (YHOO - Get Report) CEO Marissa Mayer revealed that by the end of 2014, Yahoo!'s mobile traffic will surpass its PC traffic. A week later, Yahoo! released its quarterly results, which beat the market's earnings estimates.

The company's shares sank, however, despite the earnings beat. Yahoo! has suffered with declining revenue, particularly from display ads, with a shrinking share in the U.S display market. Moreover, the company's guidance for the current quarter came below market expectations.

Alibaba -- a company in which Yahoo! holds a significant stake -- also gave results that have been criticized. But Alibaba can post considerable revenue growth in the next quarter. Meanwhile, Yahoo! continues to grow its traffic, particularly in mobile.

The CEO has proven her ability to turnaround Yahoo!'s declining global traffic numbers. She now has to prove her ability to translate the higher traffic into increasing ad sales.

Yahoo!'s shares have been under pressure this year, showing a decline of 6% since January, and are currently trading at around $38.

Investors should watch out for the impending Alibaba initial public offering and the expected increase in Alibaba's revenue for the current quarter, as well as an end to Yahoo!'s declining display-ad sales. Any of these could turn into a catalyst for an upside for Yahoo! investors.

The Earnings Beat

In its fourth-quarter results Yahoo! reported a 6% year-over-year decline in revenue to $1.27 billion, which came in line with analysts' estimates. On the other hand, its net income rose 28% to $348.2 million from a year earlier. This translated into a 31% growth in adjusted earnings to 46 cents per share, which was better than market's expectations of 38 cents per share.

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