Revenue Falls, But Yahoo Shares Jump 7% To Reach A Five-Year High

Shortly after the stock market opened, Yahoo shares (NASDAQ:YHOO) have jumped to 28.91, representing a 7.55 percent increase over yesterday’s closing price of 26.88. More importantly, it represents a five-year high for the Silicon Valley veteran. Yet, Yahoo announced its Q2 earnings yesterday and it wasn’t as straightforward as the NASDAQ makes it look. Revenue was down 1 percent year over year to $1.07 billion, and EPS was slightly up to 35 cents.

Today’s stock performance is even more surprising because the stock has been doing incredibly well over the past twelve months. With a share price of 15.65 on July 16, 2012, today’s high represents an 84.7 percent increase. Shares haven’t reached that level since May 2008, 62 months ago. It was a completely different time for the company.

While Yahoo beat analyst expectations for EPS (30 cents), it fell $10 million short on the revenue front. And the outlook disappointed many investors. With a revenue guidance of +0.7 percent for 2013, it is below the +1.8 percent jump that the company announced during its previous earnings report. In other words, revenue is still a major issue for Yahoo.

Screen shot 2013-07-16 at 1.23.06 PM

But investors are confident that Marissa Mayer can still turn things around. After a year at the head of the company, she has already taken significant actions, acquiring Tumblr for $1.1 billion and a lot of other companies, such as Stamped, Qwiki, Astrid, Ghostbird Software, Summly, and Xobni.

When it comes to finance, Yahoo has initiated a $5 billion share buyback program, pumping the stock and proving that the company is very confident in its own future. It could have affected the stock even more than the acquisition spree the company is now famous for.

Employees, executives, investors all believe that Yahoo can make things work. But the company only lacks one thing — revenue growth. For now, the stock market is giving it the benefit of the doubt, as if Yahoo was still a startup. But changes are necessary in the coming quarters to sustain this kind of market performance.

Screen Shot 2013-07-17 at 4.38.43 PM