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.
"The taxes alone are a big, big deal and will cause a big difference in value," Wieser said. "It's not impossible to avoid paying taxes on it, but there are structures they would have to create to make that work."
Wieser says he doesn't expect Yahoo to lay out specifics about how it plans to avoid another massive tax bill, but he does hope to hear at least some mention of the issue.
Wieser has a $38 price target on Yahoo's stock, a price that reflects the company paying a 35 percent tax rate on a deal that values Alibaba at $150 billion. However, Wieser said his estimate is conservative, and there is potential for upside if the company can manage to pay a lower tax rate.
In a recent note to clients, Youssef Squali, an Internet and media analyst at Cantor Fitzgerald, estimated that 430.9 million of Yahoo's 524 million Alibaba shares are still held in Hong Kong. And assuming there is no capital gains tax on the Hong Kong-held shares (pre-U.S. repatriation tax) there could be a $10-$15 per share of additional upside for the stock, Squali said.
Squali, who rates the stock as a buy with a $42 price target, said that new cash from Alibaba's IPO will also continue to drive the stock short-term. He expects investors will be listening to see how the company plans to spend that money.
As for Yahoo's core business of display and search advertising, well, investors won't be completely ignoring it.
Analysts surveyed by Thomson Reuters estimate the company will report earnings of 38 cents per share (an 8 percent increase year-over-year) on revenue of $1.08 billion (1 percent increase vs. a year ago).
Yahoo expects revenue (ex-TAC) to be in the range of $1.12 billion to $1.16 billion.
Alibaba has served as a growth crutch for Yahoo, but as Alibaba's IPO draws closer, investors will want to see progress in Yahoo's ad business.
Squali estimates that Yahoo's display revenue (ex-TAC) for the second quarter increased 2.9 percent year-over-year to $435.6 million and search (ex-TAC) increased 7.3 percent during the same period. While this is a move in the right direction, it's still very weak compared with growth seen by industry competitors, Squali said.
"In our view, for the stock to work longer-term, management needs to prove that it can get Yahoo to grow at industry rates, something easier said than done," he said.
—By CNBC's Cadie Thompson