Yahoo Inc's shares rose as much as 9 percent in heavy trading on Wednesday, a day after Chinese internet company Alibaba Group Holding Ltd, in which it holds a 24 percent stake, reported a surge in quarterly revenue.
At least nine brokerages raised their price targets on Yahoo's shares ahead of Alibaba's IPO filing, expected next week.
The share, up 5.5 percent at $36.10 in early trading, was the most heavily traded stock on the Nasdaq.
"We continue to recommend aggressive purchase of (Yahoo's) shares ahead of the Alibaba IPO," Topeka Capital Markets analyst Victor Anthony said in a note.
Alibaba, which reported a 66 percent rise in fourth-quarter revenue, is expected to file prospectus for the share sale as early as Monday, sources said.
The IPO is set to be the largest in the United States since Facebook Inc's 2012 market debut and it is the most awaited IPO in what's expected to be a record year for U.S. tech debuts after Twitter Inc's successful IPO in 2013.
Alibaba's impressive performance overshadowed Yahoo's anemic revenue growth in the first quarter.
Analysts, however, were positive on growth in Yahoo's core display and search advertisement revenue as the company invests in mobile, social, video and native advertisement products.
Yahoo's display ad revenue grew for the first time in more than a year, while search revenue rose for the ninth straight quarter.
Speculation about the valuation of Alibaba has reached a fever pitch, with some brokerages pegging it as high as $190 billion. This sets Yahoo up for a huge windfall when it eventually sells its Alibaba stake.
"The potential prospects of an Alibaba IPO are the chief motivation for our buy recommendation, but our positive view on shares is also supported by our increasing confidence in the core YHOO operation," CRT Capital analyst Neil Doshi said.
Yahoo could benefit if it is able to liquidate its Alibaba stake in a tax-efficient manner, Wells Fargo analyst Peter Stabler said.
Wells Fargo raised its rating on Yahoo's stock to "outperform" from "market perform."
Yahoo's shares have jumped about 50 percent in the past year as CEO Marissa Mayer pushes ahead with her turnaround plan.
(Additional reporting by Soham Chatterjee; Editing by Saumyadeb Chakrabarty and Kirti Pandey)