Stock Watch: Yahoo! Beats Street, But Stock Tumbles

In early trading today, shares of Yahoo! (Nasdaq: YHOO) fell hard for the second straight day. This tumble came despite the announcement on Tuesday of a two-for-one stock split and strong fourth-quarter earnings that beat analysts’ expectations.

Yahoo! reported net income of $57.6 million, or 19 cents per share. Analysts had expected Yahoo! to earn 15 cents per share. The stock split is for shareholders of record on January 20, 2000, and will be reflected on Nasdaq trading prices on Feb. 14, 2000.

Revenue growth was strong, with fourth-quarter numbers rising to $201.1 million from $91.3 million, due to growth in advertising and e-commerce revenues. Yahoo! Shopping averaged more than three million unique users during the holiday season, according to Media Metrix.

Long-term investors in Yahoo! probably have little to worry about, because this activity looks like a case of a stock running up before its earnings, only to pull back after the numbers are announced. Numerous analysts raised their earnings estimates and price targets on Yahoo! this morning.

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