NEW YORK (AP) -- Yahoo soared 8 percent in trading before the opening bell Wednesday after quarterly results showed an aggressive push into Asia and a slight pickup in advertising revenue.
Still, some analysts that follow the company say they need to see evidence that CEO Marissa Mayer is developing Yahoo's core business, with an IPO for Alibaba imminent.
Most of Yahoo's profits are coming from its holdings in two Asian Internet companies — China's Alibaba Group and Yahoo Japan. Marketers are spending more each year to advertise on line, but the vast majority of that money is being sucked up by Google Inc. and Facebook Inc.
A 24 percent stake in Alibaba has turned into Yahoo's crown jewel as it prepares to go public on the New York Stock Exchange later this year. Some analysts place its value at around $100 billion.
Pacific Crest Securities analyst Evan Wilson said that while Alibaba's accelerating growth is a good thing for Yahoo, he's still not seeing the signs of a turnaround in the company's core profit that he would like.
Wilson backed his "sector perform" rating for the stock Wednesday, noting that last year the company took significant steps toward improving its products and ad sales and that the first-quarter results may be a sign that it's on the right track.
But he said that even with a strong focus on revenue growth this year, Alibaba will be the main factor in Yahoo's fortunes. Expectations for the company's initial public offering valuation are "crazy high," Wilson wrote, and while Yahoo has stopped the bleeding, he remains concerned about its core profit growth.
There has been a lot of pressure on Yahoo shares over the company's core business. Mayer's arrival in July 2012 preceded a massive run-up in the company's stock price but that trajectory has wilted this year, with shares down more than 15 percent to date.
That sharp decline provides room for investors who want to get in now, Jefferies & Co. said Wednesday, as it resumed coverage of Yahoo with a "buy" rating and a $50 price target.
"The core business is showing slow signs of an inflection, cash flow is being used to buy stock, and the Asian investments are showing strong performance, so we think the stock has compelling risk/reward," wrote analyst Brian Pitz at Jefferies.
In premarket trading, Yahoo shares rose $2.74 to $36.95.