Yahoo! (YHOO) Continuing Higher Following Earnings Beat; Analysts Mixed

Yahoo! Inc. (Nasdaq: YHOO) has continued its upside momentum today (up 4.2%) following last night's after-hours success. This strong push has come in the wake of the company reporting Q3 EPS that were more than double the Street estimate: $0.15, versus the analyst estimate of $0.07.

Goldman Sachs is remaining neutral on Yahoo! as they see the company’s search revenue weakening with a 4% drop over the year-ago quarter and a 19% decline since the third quarter of 2008. The firm points out that while Yahoo! is falling in search engine revenue, competitor Google (Nasdaq: GOOG) has raised its search revenue by 7%.

According to Kaufman's Aaron Kessler, Yahoo!’s improved display advertising is a sign that the company could begin to show sustainable growth again. Kessler maintains a Hold rating and a $19 price target.

On the conference call yesterday, a Yahoo! exec said that despite a pending deal with Microsoft (Nasdaq: MSFT), Yahoo! has no plans to abandon the search engine aspect of its business. The company expects the Microsoft deal to close early in 2010.

In a prepared statement yesterday, Yahoo! CEO Carol Bartz said, “We had a solid third quarter that signals our major businesses have stabilized.”

Bartz missed the conference call due to a minor illness that will keep her from doing press today as well.

Yahoo! shares most recently traded at $17.875, up 4.11% for today's session.

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