The drama is rising in anticipation of Yahoo’s third-quarter earnings release Tuesday.

Analysts were already anxious to learn more about the Net search and advertising company’s performance and its planned spinoff of its stake in Chinese e-retailing giant Alibaba.

Now, they will hope to hear from CEO Marissa Mayer about whether there should be concern about  some key executive departures. On Monday, mobile payment company Square announced that it had hired away Jacqueline Reses, Yahoo’s chief development officer. Last month, Yahoo’s marketing chief Kathy Savitt left for start-up film and television studio STX Entertainment.

Yahoo is scheduled to report results after the market closes.

Most analysts expect the company  report sales within its own forecast of adjusted revenue of $1 billion-$1.04 billion, down from $1.094 billion in the third quarter of 2014. Analysts estimate Yahoo will deliver earnings per share of 16 cents and revenue of $1.024 billion, according to a consensus forecast compiled by FactSet.

And many analysts also think that Yahoo shares (YHOO), which closed Monday up 0.4% to $33.50, are undervalued. They still see good things in Yahoo’s spinoff of what amounts to about 15% of Alibaba (BABA) even though the Internal Revenue Service would not deem it a tax-free move, in advance of the spinoff.

That deal, expected to happen before the end of the year, will create a new firm, Aabaco Holdings, which will own about 384 million shares, valued at about $25 billion with a 15% tax taken into account. “The spin of the BABA assets are important not only for the value creation generated by the tax efficiency, but also to assist in unlocking the value of the core business,” said BGC Partners analyst Colin Gillis in a note to investors Monday. He issued a $40 price target for Yahoo stock.

The cash flow at Yahoo’s core business, which his firm values at $4 billion, “could be meaningfully improved, and making this business trade on its own merits is a critical step for the value to materialize,” he said. “We see opportunity for the company to make improvements in search revenue via partnerships, and are mildly positive on management efforts in mobile and video.”

RBC Capital Markets analyst Mark Mahaney last week released an earnings preview with a $47 price target noting the potential for a “classic ‘Net turnaround story,” but saying the company “has its work cut out for it.”

Yahoo’s overall share of desktop search is about 13%, down from closer to 20% several years ago but still up significantly from the roughly approximately 10% level seen in 2014, he said. The company has “a renewed focus” on mobile, “but for the time being, we think the company is nowhere nearly as well positioned in Mobile as Google,” he said.

Yahoo faces increasing competition across the board, noted Needham analyst Laura Martin in a recent note in which she lowered its target price to $40 from $55. She expects the company to meet revenue expectations and beat earnings by one cent. But long-term, “if employee turnover rises, this is bad for long-term shareholder value,” Martin wrote.

S&P Capital IQ analyst Scott Kessler, who notes that the stock is up 15% since the end of last month, has a slightly lower target of $38. “Frankly, we don’t feel so good about the executive departures and the potential tax implications associated with the Alibaba spinoff,” he told CNBC Monday. “We see value, but we see risk and that translates to a buy for us.”

Still, CEO Marissa Mayer, now in her third year, “hasn’t reignited growth at the company,” Kessler said, and could face “a broader challenge of ‘Where is Yahoo going?’ and ‘How is the morale at the company?’.”

Follow Mike Snider on Twitter: @MikeSnider

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