Ahead of the Bell: Yahoo climbs after 2Q results

NEW YORK (AP) -- Yahoo Inc. shares climbed in premarket trading Wednesday after the Internet company's second-quarter earnings grew — even though the results highlighted challenges it faces as it competes with rivals Google Inc. and Facebook Inc.

Yahoo's stock added 66 cents, or 2.5 percent, to $27.54 in premarket trading.

The company's shares were initially down when the results were released after the market closed Tuesday, but reversed course after management assured investors that it intends to keep buying back the company's stock. The commitment comes after Yahoo had already spent $3.6 billion buying back about 190 million of its shares since last year.

Cantor Fitzgerald analyst Youssef Squali called the quarter's results "muted," with lighter revenue and higher earnings per share.

"While the top line is stabilizing, and the pace of product launches/user engagement is improving, Yahoo continues to lose market share in both display and search (advertising)," the analyst wrote in a note to investors.

That said, he added that in the short term Yahoo's stock is benefiting from the prospect of an initial public offering by Chinese Internet company Alibaba Group, in which it owns a minority stake. Yahoo's shares are also benefiting from improvements in Yahoo's Japanese arm and the buybacks, "all on the back of an attractive valuation," the analyst wrote.

Yahoo shares closed Tuesday at $26.99, up 35 percent since the start of the year. The stock has traded between $14.59 and $27.68 in the past 52 weeks.