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The Love-Hate Trade

One of the Street’s most loved -- and hated -- stocks reports earnings after the bell on Tuesday. What’s the trade?

Of course we’re talking about Yahoo! the Internet company that keeps giving investors indigestion.

This is the third straight year that Yahoo has vowed to boost its sagging profits, with a different chief executive calling the shots each time. The latest, Carol Bartz, is trying to undo the damage sustained under the watch of her predecessors, former movie studio boss Terry Semel and Yahoo co-founder Jerry Yang.

Given Bartz just joined the Sunnyvale, California-based company in January, expectations for first-quarter earnings aren't high. But there are still doubts about whether Yahoo will even be able to meet a low target because it has become more difficult to sell Internet advertising as the recession worsened.

Of course investors will be eager to hear any hints about a possible deal between Yahoo and Microsoft. Last May former CEO Jerry Yang turned down an offer to sell the firm to Microsoft for $47.5 billion. That decision still haunts Yahoo's shareholders. However, it’s widely believed that a deal now would only involve Yahoo’s search business – and not the entire company.

What should you expect?

Analysts surveyed by Thomson Reuters expect Yahoo to earn 8 cents per share on revenue of $1.2 billion.

Citigroup Internet analyst Mark Mahaney tells Fast Money he agrees that the bar is set very low and Yahoo! will likely meet or beat. However, he thinks investors will really be looking for signs of a fundamental turnaround and "they probably won't see that for another two quarters." Also Mahaney expects double digit losses in online advertising. “There’s no strength in that area now.” As a result he’s cautious.

Meanwhile Jefferies & Co. analyst Youssef Squali already is getting excited about a potential deal with Microsoft. In a recent research report, Squali estimated that Yahoo could trim its annual expenses by up to $1.3 billion by turning over its search operations to Microsoft and generate $600 million to $800 million in additional revenue by selling display advertising on Microsoft's sites.

Stifel Nicolaus & Co. analyst George Askew is similarly enthusiastic, predicting a Microsoft partnership would be "very positive" for Yahoo.

Is there a trade here?

Joe Terranova thinks it's entirely possible Yahoo! beats expectations and the stock pops on the news. However, he also cautions that Yahoo! has burned him and so many others in the past.

Read More:
> Earnings preview: More woe expected in Yahoo's 1Q



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Trader disclosure: On Apr 20th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;Najarian Owns (CX) Call Spread; Najairan Owns (MCD) And Is Short (MCD) Calls; Najarian Owns (PALM) And Is Short (PALM) Calls; Najarian Owns A (YHOO) Call Spread; Najarian Owns (RF) Call Spread; Najarian Owns (PCU) Call Spread; Najarian Owns (AMLN) Calls; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman Owns (AXP); Finerman's Firm Owns (PBR), (CSCO); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (USO); Finerman's Firm And Finerman Are Short (BAC) And Own (BAC) Preferred Shares; Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares

Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Terranova Owns (MS), (DELL), (IBM), (BP), (DIS), (INTC); Terranova Owns (COP) Calls, (DIS) Calls, (XOM) Calls

Terranova Owns (HES) And Is Short (HES) Calls; Terranova Owns (BRCM) And Is Short (BRCM) Calls; Terranova Owns (IBM) And Is Short (IBM) Calls; Terranova Owns (JOYG) And Is Short (JOYG) Calls; Terranova Owns (JPM) And Is Short (JPM) Calls; Terranova Owns (INTC) And Is Short (INTC) Calls; Terranova Owns (POT) And Is Short (POT) Calls; Terranova Owns (WYNN) And Is Short (WYNN) Calls; Terranova Owns (X) And Is Short (X) Calls; Terranova Owns (XOM) And Is Short (XOM) Calls; Terranova Is Short NYMEX June Crude Oil

Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (CAL), (DLR), (EPR), (EXR), (IGE), (MAC), (MEE), (DBC), (DBV), (SKT), (UA), (CLB), (WBMD); Virtus Investment Partners Owns More Than 1% Of Blackrock Liquidity Funds FedFund Portfolio; Virtus Investment Partners Owns More Than 1% Of Corporate Office Properties Trust SBI MD; Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co; Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Goldman Sachs Financial Square Fund – Money Market Fund

GE Is The Parent Company Of CNBC

For Mark Mahaney
Members Of Mahaney's Research Team Own (GOOG)
Citigroup Global Markets Or Affiliates Owns 1% Or More Of Common Equity Securities Of Yahoo Inc.
Citigroup Global Markets Or Affiliate Received Non-Investment Banking Compensation From (YHOO), (AMZN), (GOOG) In Past 12 Months
Citigroup Global Markets Has Or In Past 12 Mos. Had (YHOO), (AMZN), (GOOG) As Clients (Non-Inv. Bank., Securities-Related)
Citigroup Global Markets Has Or In Past 12 Mos. Had (YHOO), (AMZN), (GOOG) As Clients (Non-Inv. Bank., Non-Securities-Related)
Citigroup Global Martets Is A Market Maker In (YHOO), (AMZN), (GOOG)
Citigroup Global Markets And/Or Affiliates Has A Significant Financial Interest In Relation To Yahoo Inc.
Citigroup Global Markets And/Or Affiliates Owns 2% Or More Of Any Class Of Common Equity Securities Of Yahoo Inc.