You call yourself a growth stock, Yahoo! (NASDAQ:YHOO)? Some investors may beg to differ. The humbled search engine giant grew its top line by just 13% for the December quarter, with a meager 8% domestic uptick. Free cash flow? It fell by 16% to $278 million. The future doesn't appear all that appetizing, either, with Yahoo! warning that 2007 will come in weaker than expected.

The seemingly lackluster report stings, especially in light of recent Yahoo! headlines that cast the bellwether in an unflattering light.

Yesterday, Nielsen/NetRatings reported that Yahoo!'s market share in search slipped to 23.6% for the month of December (from a 24.3% slice a year earlier). The Wall Street Journal also ran a story on how some advertisers have had problems in the integration process of Yahoo!'s new paid search platform.

So how does that make you feel? Getting angry at Yahoo!? Want to take a battering ram up to Sunnyvale and ask for CEO Terry Semel's virtual head on a platter?

Don't do it. The company isn't dead. You just need to know where to go to find a pulse.

Starting at the bottom
Earnings come in different flavors, and Yahoo! is serving up an assortment worthy of a Baskin-Robbins scoop shop. Posted earnings clocked in at $0.19 a share. Adjusted profits came in at $0.16 a share, or $0.21 a share before a tax adjustment and stock-based compensation expenses. Pick a flavor, any flavor, and Yahoo! still came in ahead of the $0.13 per share that Wall Street was expecting. It's also a welcome break from the $0.11 a share that the company had earned in each of the first three quarters of 2006.

Have Yahoo! shares been stuck in a holding pattern since Google (NASDAQ:GOOG) went public in the summer of 2004? Sure. The company has already fired a warning shot for 2007, too. It is now looking for revenues before traffic acquisition costs to climb 9% to 20% higher here in 2007. Understandably, analysts find themselves fretting over their original projections of 20.2% in top-line growth.

No, it's not pretty, but don't go tossing your dancing shoes into the bonfire.

Defending Yahoo!'s life
The media may bash Yahoo! for its mixed showing, so let me be a contrarian and point out some of the things that this Motley Fool Stock Advisor recommendation is doing right these days.

  • The company may have seen revenues per page dip by 3% on its network of third-party publishers, but at least they provided a 22% spurt in traffic to Yahoo!. That will serve the company well as it faces Microsoft's (NASDAQ:MSFT) transformation from an ad-serving partner into a full-fledged competitor.
  • Google is still the star attraction here, but let's not belittle Yahoo! on the recent victory it enjoyed when Google Answers bowed out. It just lacked the addictive Web 2.0 charm of Yahoo! Answers.
  • Panama is the name of Yahoo!'s new ad platform. It is in the process of migrating its customers -- big and small -- to the service, which apes Google in many ways. For instance, instead of simply serving up the ads of the highest bidders, it will serve more relevant ads with higher clickthroughs that make up the difference in volume. Yahoo! is no Google, but this should begin having a positive effect by the June quarter. Despite the bumpy integration process, this should only get better with every passing quarter.
  • Display, video, and mobile ads may be niche offerings, but Yahoo! is growing in most of the nascent technologies and will be well-positioned for incremental greenery if any of the platforms blossom. One early gem may come in the likely popularity of Apple's (NASDAQ:AAPL) iPhone, with Yahoo! providing Yahoo! Mail and oneSearch functionality built into the phone's browser.
  • Last month's organizational overhaul won't bear fruit immediately, but it's one more reason to expect Yahoo! to find a way to shake off the stink of stagnancy.

Shaking off the stink of stagnancy? I can't believe I just wrote that, but if it's a killer dance move, let's hope that Yahoo! has the ballroom grace of Emmitt Smith.

Yahoo! is an active recommendation in the Motley Fool Stock Advisor newsletter service. To find out all the reasons why, take a free 30-day trial to the service today. You'll also get access to every single buy report made by the newsletter team, in addition to community discussion and analysis on each one. Just click here to sign up today.

Longtime Fool contributor Rick Munarriz is a frequent Yahoo! visitor, but he does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. Microsoft is an Inside Value pick. The Fool has a disclosure policy.