Derek Brown, a financial analyst with Cantor Fitzgerald, said what happens with the stock now "depends a lot on execution by management and ongoing developments with its strategic direction."

He agreed that while the Google deal offers short-term potential for benefits, "it raises meaningful longer-term questions about Yahoo's strategy and opportunity."

Brown, who maintains a "hold" rating for Yahoo, believed that the acquisition by Microsoft was more likely to happen than not.

Meanwhile, on Sunday, Citigroup financial analyst Mark Mahaney downgraded Yahoo to "sell" after Microsoft withdrew its bid.

Mahaney sees three scenarios for Yahoo. The first and most likely, at a 45 percent probability, is that Yahoo goes back to "business as usual," in which case he would value its stock at $22 per share.

The second scenario, with a 40 percent probability, sees Yahoo entering into a "major strategic alternative," such as the Google outsourcing deal, a partnership with AOL or MySpace and a sale of Asia assets, and would put the stock at a $26 value in his view.

The third and least likely scenario, at 15 percent probability, is that Microsoft trots back into the picture and snaps up Yahoo for $35 per share.

With the weighted average of those three options at $26 per share, Mahaney moved to downgrade the stock to "sell."

For its part, Microsoft saw its stock remain almost flat, dropping 0.55 percent to $29.08, while Google's stock rose 2.34 percent to $594.90.