SUNNYVALE, Calif. ( TheStreet) -- Shares of Internet giant Yahoo! ( YHOO) will bask in the warm afterglow of the company's recent search partnership with Microsoft ( MSFT), offering plenty of upside to investors. This is the message from analyst firm Jefferies & Company, which raised its Yahoo! price target Tuesday, citing the benefits of the Microsoft deal. "Despite the recent run-up in Yahoo! shares, we find the valuation still attractive as it fails to fully reflect accretion from the Microsoft deal, potential upside from Asian assets and rebound in display ads ," wrote Jefferies analyst Youssef Squali, in a note released Tuesday. "Shorter-term, management's focus on core priorities and cost should bode well for stock." Jefferies raised its Yahoo! price target from $20 to $23, assuming the deal closes by the end of 2010. Yahoo!'s shares have risen more than 35% in the last six months, although Squali feels that the company's stock is still undervalued. Under the terms of the 10-year pact, Yahoo! will use Microsoft's Bing search engine and collect 88% of the advertising revenue for the first five years of the deal. Seen as something of a masterstroke by Microsoft in its attempts to challenge Google ( GOOG), Squali predicts that the agreement will also help Yahoo! expand its margins. Yahoo! also launched a $100 million branding campaign recently, a key part of CEO Carol Bartz's efforts to reposition the company. This, however, was not factored into Jefferies' estimates, although Squali sees the move as a positive.