Yahoo! Fans Let Loose

The stock finally rises after a long, daunting decline.
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Yahoo!

(YHOO)

shareholders finally have reason to yodel.

Shares of the most popular Web site surged 6% Wednesday after the company

posted solid first-quarter numbers late Tuesday.

Analysts at UBS and several other brokerages praised Yahoo!'s execution in the face of skepticism that had driven down the stock more than 20% since the start of the year. Fans argue that the selloff, which started after Yahoo! posted disappointing fourth-quarter earnings back in January, was overdone.

"We believe Yahoo! is on track to deliver a solid 2006," says Denise Garcia, an analyst with WR Hambrecht who rates Yahoo! shares buy. She increased her 2006 revenue forecast to $4.8 billion from $4.7 billion because "brand-based advertising activity will increase" in the second half of the year, she writes.

eBay

(EBAY) - Get Report

is due to issue results after the close of trading Wednesday. Investors probably won't breathe easy until

Google's

(GOOG) - Get Report

earnings are released Thursday.

Speaking of Google, it continues to cast a shadow over Yahoo!, particularly in search. Investors are awaiting details on Yahoo!'s plans to increase profits from search. Chief Financial Officer Susan Decker argued that Yahoo!'s search business is better than it has been portrayed, with first-quarter search queries showing an increase between 15% to 20%.

"I mention this specifically because there's been some confusion of late due to third-party data, which has implied a massive deceleration in our search-query growth to levels significantly slower than what we're actually witnessing," Decker told analysts during the conference call.

comScore Networks has continued to show that Yahoo! is losing market share to Google. Data from rival Nielsen//NetRatings, which uses a smaller sample size than comScore, indicates that the search market has changed little. Both companies show Google with a commanding lead over second-place Yahoo!.

Some observers question the relevance of Yahoo!'s claims.

"Sure, queries are up," says Danny Sullivan, editor of the Web site

searchenginewatch.com, in an email. "I suspect everyone has more queries happening. But that's not the same as share of search. It's like

Wal-Mart

(WMT) - Get Report

saying they had more people shop with them in 2005 than 2004. OK, but maybe there were more people overall shopping, so every store saw traffic rise."

In an interview, Decker says the company had an "an ongoing dialogue" with third-party providers about how they gather market data. She also said that Yahoo! has a good relationship with market researchers.

Yahoo! investors will get more details about the company's plans to increase its profits from search during next month's analysts' meeting. The company declined to provide many details about what it's considering other than that the initiative will be rolled out in three phases.

The one area in which Yahoo! is expected to continue to do well this year is in branded advertisements, typically banner ads and sponsorships on Web sites. Even companies such as packaged goods firms that have been slow to move online are increasingly doing so, according to

The Wall Street Journal

.

Unfortunately for Yahoo!, Google also is going after these same advertisers. Recent new Google features include Google Finance, a business news site that competes with Yahoo! Finance offerings.

On Wednesday, Yahoo! rose $1.89 to $33.19 ,and Google added $4.92 to $409.16.