Marissa Mayer's Yahoo! Is Doing it Right

Internet innovator-turned-dinosaur-turned-innovator Yahoo! (NASDAQ: YHOO  ) reported results this week that crushed analyst estimates on the bottom line, but fell short on revenue and guidance. This sent the stock down five points early, but it recovered most of it by the next day. In the continued turnaround of the company, Wall Street has again failed investors with shortsighted opinions. Yahoo!'s growth may indeed be slower than we want it to be in the coming months, but that doesn't speak of the company's recent accomplishments, nor of its long-term outlook. Here's why Yahoo! is still a great company to own.

Earnings recap
For the first quarter of 2013, Yahoo! brought in more than $1.1 billion, not including traffic acquisition costs. This number comes in roughly flat with the prior year, and missed analyst estimates. Adjusted EBITDA of $386 million was flat, as well, though the bottom line's non-GAAP number of $0.38 per share comes in at a sharp increase to the prior year's $0.27, and beat Wall Street's expectations.

During the quarter, we saw a brand new Yahoo! main page, a new partnership with Dropbox making the email app better for sharing and attaching files, and four acquisitions in the mobile space. The company even aired its own original series, ala Netflix, called Burning Love -- a dating show spoof. In just one year, the company shows a much more enlivened and interesting business. It may not have wowed investors with the immediate numbers, but this is clearly a business in the midst of a renaissance. Most other businesses conducting such an overhaul incur short-term losses, but Yahoo! seems well beyond that at this point.

Ad numbers were weak -- down 11% from the year-ago quarter. While this isn't what we would ideally like to see, the company has many other revenue drivers, and I believe the Street put too much importance on this segment.

Where things really went south for the release was in guidance. For the second quarter, the company is expecting just shy of $1.1 billion, again with traffic acquisition costs factored out. The Street was looking for $1.11. Doesn't seem like the end of the world to this Fool.

What to look for
Yahoo! grew its mobile user count to 300 million this quarter. At the end of 2012, that number was 200 million. To point out the obvious -- that's a tremendous win for the company. To point out another obvious -- mobile is a much more exciting future than display ads, so why are analysts kvetching over dwindling display ads? Yahoo! has much greater goals than that.

Moreover, the company's stake in Alibaba could send shares higher with an IPO right around the corner. Some analysts believe it will come out of the gates with a value of $80 billion. Another Asian property, Yahoo! Japan, is not yet monetized, but is worth billions more. The result leaves Yahoo!'s core business -- its forgettable display ads -- as a very small piece to a very big company.

In short, investors are wise to look beyond the Street's myopia into Yahoo!'s future.

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