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Yahoo bull: Brace for more volatility after earnings

Yahoo bull: Brace for more volatility after earnings

It's been anything but a smooth ride for Yahoo shareholders so far this year. The stock, which climbed more than 25 percent in 2014, has lost a third of its value so far in 2015. And according to one bullish Wall Street analyst, Yahoo's turbulence isn't likely to level out any time soon.

"Expectations remain low going into the quarter," wrote Mizuho analyst Neil Doshi in a recent research note, adding that he expects continued volatility in the stock.

On CNBC's "Fast Money" on Monday, Doshi laid out the most important things he'll be looking for when Yahoo reports third-quarter results after Tuesday's close.

First and foremost, Doshi said he would be listening closely for any update on Yahoo's plan to spin off its stake of Alibaba. "Yahoo owns 15 percent of Alibaba, they're planning to spin that off in the fourth quarter," he said. "We'd like to see if they can get that done this quarter, and if they can do it in a tax-free manner."

In September, Yahoo said it would go ahead with its spinoff plans, despite the fact that the IRS denied to provide Yahoo with an advanced ruling on whether or not the move would be tax free. Doshi believes that there is a 50 percent chance that Yahoo would be forced to pay taxes on such a move.

Apart from its Alibaba stake, Doshi said he'd be watching for growth in Yahoo's mobile, video, native advertising and social spaces. "We believe that if they can grow that over 50 percent or more, that would be viewed positively for investors," he said.

Doshi said Yahoo's margins would be another key factor that could determine the direction of the stock. "Anything Yahoo can do to show that they're improving their cost structure to show margin improvement would be viewed positively," he said.

Despite his low expectations and concerns about future volatility, Doshi said he expected Yahoo to trade higher on its earnings report. Doshi currently has a "buy" rating and $40 price target on the stock, which is about 20 percent above Yahoo's current price.