Yahoo hosted its investor day on May 25 and as expected Yahoo Japan, display business and search growth took center stage.

Overall, while we are encouraged by the revamp of the technology platform and solid display growth, search growth continues to be a drag near term and long-term margin targets for 2013 are currently below range due to the lower revenues, ThinkEquity analyst Aaron Kessler wrote in a note to clients.

Kessler has a buy rating and $20 price target on Yahoo stock.

While display revenues have been in line with its 2010-2013 revenue compounded annual growth rate (CAGR) goal set at last year's analyst day, both search and other revenues have tracked below for 2011.

However, Yahoo believes search growth should be able to return to a 3-6 percent CAGR for 2012-2013 and overall revenues should be able to increase 7 percent to 10 percent in 2012-2013. Likewise, given the lower revenues, operating margins are tracking below its 2012 goal of 27-33 percent ex-tax operating margins.

Display, Search

The display segment remains on track with management expectations of13 percent to 16 percent CAGR 2010-2013 and has benefited from increased, solid engagement metrics and more flexible programming, and the rollout of APT 2.0 platform.

Yahoo indicated that it is still working with Microsoft to improve revenue per search (RPS) though there are some promising signs since April and they continue to believe they can meet their RPS goals before the RPS guarantee expires in March 2012 for the United States.

Yahoo expects search to be below its 3 percent to 6 percent 2010-2013 CAGR range in 2011 but return to that range from 2012-2013.

Regarding Alipay, Yahoo noted that discussions among Alibaba Group, SoftBank, and Yahoo are still ongoing, but have made progress recently. All parties appear to be involved in productive discussions with Alipay and ensuring value remains with Taobao though it is not clear how Yahoo will be compensated for the transfer of the Alipay business.

Yahoo also indicated that for Yahoo Japan that it has high interest in either a traditional spin-off or tracking stock and would consider an outright sale or other structure depending on the value it received.

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