Is Alibaba carpet ride over for Yahoo

"It is a legitimate concern," says Wedbush Securities analyst Gil Luria. "Yahoo's valuation essentially reflects its share in Alibaba."

With more than $4 billion in cash, $1 billion in debt and $1.2 billion in profit last year, Yahoo appears to be in splendid financial shape.

Yet its market valuation of $42.4 billion marks a contrast to highflying tech stocks, whose market value seems otherworldly compared with their core assets. Facebook, for example, has a market value of nearly $200 billion.

With a high percentage of Yahoo's value tied to its stake in Alibaba, it is arguably one of its few remaining assets, Luria says. "Investors are putting little weight on Yahoo operations; most of the value is driven by Baba," he says.

A slew of high-profile acquisitions such as Tumblr ($1.1 billion) under Marissa Mayer — Yahoo's seventh CEO since 2001 — have done next to nothing to move the revenue and profit needle for Yahoo, Luria and others say.

A rare winning bet

When Yahoo made the risky bet nearly a decade ago to plow $1 billion into Alibaba, then a company few Americans had heard of, Yahoo boasted a popular portfolio of e-mail, finance and fantasy sports sites.

Since then, that investment appears to be one of the few things Yahoo has gotten right.

"Almost nothing has been working for Yahoo in the last decade or so, and their best investment has been getting the stake in Alibaba," says Kinshuk Jerath, associate professor of marketing at Columbia Business School.

The numbers aren't good:

• Yahoo's revenue is less than 10% of Google's.

• Yahoo's worldwide share of the digital advertising market has dwindled to 2.5%, while Google's has soared to 34%, says eMarketer.

• Since 2005, Google's sales have climbed nine-fold; Yahoo's have declined. Except for the recent run-up, Yahoo's stock price hasn't budged in that time; Google's has tripled.

The question analysts and investors have been asking is simple but complex to answer: What can Yahoo do as a business, aside from just generate value from Alibaba?

Mayer's strategy of investing in content, including a costly newsroom that employs Katie Couric and tech columnist David Pogue, is a challenging gambit when more content is available on the Web than ever. Mobile, social and video — Mayer's other growth bets — are areas in which Yahoo is playing catch-up.

"Yahoo needs to determine what it must specialize in, and invest in becoming really good at that," Jerath says. "Nevertheless, Yahoo still is in the top five most-visited websites in the U.S., and one cannot write them off."

For now, however, Yahoo will enjoy the ride: Yahoo has previously said it plans to unload about 5% of its 22.4% Alibaba stake.