What Yahoo (Nasdaq: YHOO) Stock Investors Need to See from Mayer Now

Yahoo! Inc. (Nasdaq: YHOO) stock rose 4.5% today (Wednesday).yhoo stock

But why? Slight revenue growth was the only good thing to come of YHOO's earnings report Tuesday.

And even that was hardly a feat.

YHOO's 0.8% revenue gain beat Wall Street expectations. But, Wall Street didn't set the bar high with a projected 3.3% decline.

Still, in the call to follow, YHOO Chief Executive Officer Marissa Mayer was not short on praise for a "solid" report.

But Mayer didn't mention YHOO's fifth straight quarterly loss in its primary business. Or that it has fallen nine of the last eleven quarters since she took the reins.

She also ignored the fact that Asian investments have propped up its struggling segments.

YHOO has a 35% stake in Yahoo! Japan and a 15% stake in China's Alibaba Group Holding Ltd. (NYSE: BABA). Since Mayer became CEO, those investments have generated income growth for 11 straight quarters. And that's what shareholders are focused on now.

YHOO shareholders want to know Mayer's plan for YHOO's 383.6 million shares in BABA. Will YHOO effectively cash in on that remaining stake and give back to investors?

While Mayer didn't provide a clear roadmap for YHOO's future, she did drop some hints in the earnings call for what's ahead. So here's what YHOO investors need to see actually happen...

The Most Important Factors for YHOO Stock Now

No. 1: Mayer Must Use Alibaba Cash to Reward Shareholders

This isn't the first time YHOO has tried to monetize its BABA stake. The partnership began in 2005 when YHOO bought a 40% stake in the booming Chinese e-commerce giant.

Just as Mayer took over in 2012, YHOO sold half those shares for $4.6 billion. They promised $3 billion to shareholders through buybacks.

And YHOO delivered.

They not only matched the $3 billion promise, but bought back stock to the tune of $7.7 billion.

In addition to the sale of Alibaba shares, YHOO funded this using free cash flow, bond sales, and a hedge on the Japanese yen.

Share buybacks would be a better choice than what Mayer could do - buy more companies.

She offered no indication she would slow down her acquisition strategy, over the heads of shareholder recommendations that discouraged aggressive M&A activity. She instead flaunted the Tumblr and Flurry purchases.

But shareholders don't need anymore.

"You can't buy second-tier assets and bolt them all together and get a first-tier company," Money Morning Executive Editor Bill Patalon has said of YHOO's M&A activity.

No. 2: Yahoo Shouldn't Rush to Exit Alibaba

YHOO still has a 15% stake in BABA, after it sold another 140 million shares post-Alibaba IPO. It's valued at close to $35 billion and is likely to appreciate in years to come.

Mayer's tenure has made it clear she knows that a turnaround won't happen without a proper sale of Alibaba shares.

In a repurchasing agreement deal inked before Mayer's arrival, YHOO agreed to sell more than 260 million shares when Alibaba went public.

Mayer was reluctant to agree to the initial sale in the first place.

And for subsequent BABA share sales she lobbied for a reduction in the amount of shares sold. She helped knock that 260 million down to 140 million.

Holding onto a larger stake will provide a bigger windfall when the sell-off begins.

No. 3: Yahoo Pays Close Attention to Tax Concerns

Mayer touched on the future prospect of the BABA share sale, but didn't elaborate, citing restrictions on what she could divulge.

What she did mention however is that she has tapped "the best tax experts in the country" to find a tax-efficient way to sell the shares.

That's a must-have for YHOO investors. As Rick Summer from Morningstar wrote in an analyst note, "The larger determinants of shareholder return, at least over the short term, will be the tax strategies the company is able to achieve to minimize cash tax payments for gains related to future liquidations of its investment in Alibaba Group."

More on tech earnings: Yahoo may not impress anyone with its lackluster earnings, but another tech giant crushed Wall Street expectations and its stock is taking a ride. Find out which stock and how far it can rise here...