Yahoo is scheduled to report its second-quarter fiscal earnings after the bell on Tuesday, but investors will likely be more interested in what the company has to say about the Alibaba IPO during its earnings call.
"Very little that Yahoo reports will matter. What will matter for the stock is if there is any commentary on the call about the tax plans for the proceeds from the Alibaba IPO," said Brian Wieser, a senior research analyst at Pivotal Research. "I'll be looking to see how they will prevent paying 35 percent in taxes. And then the next question is what are they going to do with the cash that is left after taxes."
In 2012, Yahoo got hit with a pretty hefty tax bill when it sold half of its 40 percent stake in Alibaba back to the company for $7.6 billion. The company ended up paying more than $2 billion in taxes in the deal.
The company is required to sell about 40 percent of its remaining Alibaba stake—or 208 million shares—when the Chinese business goes public later this year. That could leave Yahoo with a windfall of $10 billion or more, but it could also give Yahoo another major tax headache, Wieser said.