UPDATE 2-RESEARCH ALERT-Bear Stearns names Yahoo as top pick

(Recasts, adds details, updates stock movement)

Sept 4 (Reuters) - Bear Stearns named Yahoo Inc (YHOO.O) as its top pick and said the company remains an attractive acquisition candidate for either traditional media firms seeking to deepen their exposure to the Internet or from technology companies like Microsoft Corp (MSFT.O).

"Indeed, we believe that Microsoft continues to evaluate Yahoo as a target," Bear Stearns analyst Robert Peck wrote in a note to clients.

Yahoo shares were trading up about 6 percent at $24.06 in afternoon trade on the Nasdaq.

Further, beyond just a pure acquisition, Yahoo could enter other strategic partnerships that could bolster its relative competitive position in various segments. Any large deals could improve sentiment on the stock, Peck added.

The catalysts which will drive the stock over the next 16 months include success from branding initiatives, takeover/ strategic partnership talks, the Alibaba IPO and a share repurchase among other things, the analyst said.

Alibaba.com Corp, an online import-export marketplace, is partly owned by Yahoo.

A potential Alibaba IPO could add about $1 per share to Yahoo's valuation, he added.

100 DAY REVIEW

Yahoo Chief Executive Jerry Yang's "100 Day Review" was a major turning point for the company and a strategic partnership with NewsCorp NWSa.N is likely one of the proposals under the review, the analyst said.

The company could also use a good portion of the $3 billion in cash on the balance sheet to repurchase shares, the note said.

Yahoo's share price has largely discounted concerns around its three key businesses of online display advertising, online search, and broadband and paid content, the analyst said.

"While in the past investor sentiment around Yahoo's Panama had swung the pendulum too far to the optimistic (or greed) side, we think that the pendulum has now swung the other way towards the pessimistic (or fear) side," Peck said.

Project Panama is Yahoo's search ad business.

Yahoo still has plenty of challenges remaining and is clearly not out of the woods, Peck said, adding that the shares represent an attractive risk/reward scenario for investors willing to wait for Yahoo's growth initiatives to deliver positive results.

Yahoo's inexpensive relative valuation and clean balance sheet is prime for private equity players, who could take a longer term view than most investors, Peck said.

Bear Stearns reiterated its "outperform" rating on the stock with a price target of $30. (Reporting by Sharangdhar Limaye in Bangalore)