THE WEEK AHEAD: Wall Street awaits Yahoo! results

After a spate of profit warnings nailed software and second-tier Internet stocks in the past few weeks, investors are hoping Yahoo!'s second-quarter results will be enough to spark the sector higher next week.

In its latest quarter, Yahoo! topped analysts' estimates, earning $63.2 million, or 10 cents a share, on sales of $228.4 million.

This quarter, First Call Corp. consensus expects the Internet portal to report a profit of 10 cents a share.

However, analysts have been bemoaning Yahoo!'s margins of late, worried that deteriorating online advertising sales will crimp Yahoo!'s impressive growth.

"There aren't as many people spending dollars to advertise like they were six or eight months ago," said Lise Buyer, an analyst at CS First Boston. "But for every dotcom that goes away there's another established company that will find a way to work with Yahoo!."

Following its first-quarter success, several analysts raised their fiscal 2000 earnings estimates while simultaneously expressing concerns about its operating margins.

Morgan Stanley Dean Witter analyst Mary Meeker raised her 2000 earning estimate to 44 cents a share from 38 cents a share following the report while boosting her revenue estimate 8 percent to $1.025 billion.

At the time, Meeker said Yahoo!'s "key metrics were awesome, again," noting the increase in its user base, number of unique visitors and daily page views.

In March, Yahoo! recorded 145 million unique users, including 14 million users in Japan. Its global registration base grew to more than 125 million cumulative registrations for Yahoo! member services.

Total traffic soared to 625 million page views per day on average during March, compared to an average of 465 million page views per day in December.

While most analysts are expecting decent improvements in both total sales and traffic, the seasonal nature of online usage dictates the 100-plus percentage gains investors have become accustomed to will be nearly impossible to duplicate.

"For 2000, we expect to see the stock move sideways through the summer and then rally to a new high at the end of the year," said Henry Blodget, an analyst at Merrill Lynch, in a research note. "Yahoo!'s core businesses appear strong and the company is successfully expanding into new arenas (wireless, devices, international). We continue to consider YHOO a core long-term holding."

ABN AMRO's Arthur Newman said he expects Yahoo! and other Internet portal firms to meet or modestly beat estimates this quarter.

"There may be less upside to revenue forecasts then in the past, due in part to softness in dot-com advertising expenditures," he said in a research note. "The sector remains weak as investors become increasingly concerned about profitability, liquidity, interest rates, and valuation. We see few catalysts until this fall."

Yahoo! shares clearly haven't been as proficient as they were just six months ago.

On Friday, Deutsche Banc Alex. Brown analyst Andrea Williams Rice cut the stock from a "strong buy" rating to a "buy" due to slower-than-expected revenue growth and valuation issues.

After moving up to a 52-week high of 250 1/16 in February, the stock has slipped back to around $117 a share. It also split 2-for-1 in February.

And investors should brace themselves for a predictable pullback in the stock following Tuesday's earnings report.

"I'd be startled if Yahoo! doesn't meet or beat the published estimate," Buyer said.

Twenty-nine of the 33 analysts following the stock rate it either a "buy" or "strong buy."