Yahoo Now Needs Execution: Mahaney

Yahoo's investments in Flickr and Tumblr are steps toward fixing gaps in its business, but it's only the beginning of a longer journey, Mark Mahaney of RBC Capital Markets said Monday.

"They missed these trends. These are the biggest trends in the internet space, and Yahoo missed mobile, social, etc. So, they're doing the right thing," he said. "It's all about execution from here."

Yahoo recently announced that it would acquire Tumblr for $1.1 billion, and the company also announced a ramped-up, redesigned Flickr photo-sharing service with 1 terabyte of free storage.

On CNBC's "Fast Money," Mahaney said that Yahoo CEO Marissa Meyer was "following the right script."

But the purchase price of social media site Tumblr did appear expensive, he added.

(Read More: Yahoo's Tumblr Deal 'Expensive': Porter Bibb)

"You can't justify Tumblr on a DCF, ROI basis," Mahaney said. "I don't think you could've done that with YouTube, either, although financially it did work over time. It'll depend on the execution. This is a long-shot investment, and they're not going to make a real return on this for three to five years, so it's impossible to justify this. The question is: Is it the right strategic asset to take a shot at?"

Mahaney also noted that there was plenty of competition in the space, and he said that it was unknown how users were going to react to ads on Tumblr.

"It's not a guarantee this is going to work," he said.

(Read More: Yahoo's Mayer: Tumblr Will Operate Independently)

Yahoo's acquisition targets going forward could be limited.

"Look, there are some great assets out there," Mahaney said. "You try to buy Twitter, you're not going to find any sellers of Twitter. Pinterest may be too big now for a company like Yahoo to afford."

(Read More: But Wait. Didn't Yahoo Try a Deal Like This Before?)

Trader disclosure: On May 20, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long C; Karen Finerman is long JPM; Karen Finerman is long TGT; Karen Finerman is long GOOG; Karen Finerman is short JCP BONDS; Karen Finerman is short SPY; Karen Finerman is short MDY Puts; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long C CALLS; Pete Najarian is long JPM CALLS; Pete Najarian is long WFC CALLS; Pete Najarian is long MS CALLS; Pete Najarian is long XLF CALLS; Pete Najarian is long CSCO CALLS; Pete Najarian is long BBRY; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Brian Kelly is long TLT; Brian Kelly is long COPPER; Brian Kelly is long TREASURIES; Brian Kelly is long DOLLAR; Brian Kelly is short YEN; Brian Kelly is short Euro; Brian Kelly is short Oil;

For Mark Mahaney
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated by investment banking activities of the member companies of RBC Capital Markets and its affiliates: RBC Capital Markets, LLC makes a market in the securities of Yahoo! Inc. and may act as principal with regard to sales or purchases of this security.