NEW YORK (CNN/Money) - Internet media company Yahoo! posted fourth-quarter sales and profits on Wednesday that topped Wall Street forecasts but investors were less than enthused about the results.

The company reported earnings of 8 cents a share on sales of $286 million in the fourth quarter, compared to a loss of 2 cents a share and sales of $189 million a year ago. Analysts were expecting the company to earn six cents a share on $279 million in revenues, according to earnings tracking firm First Call. For more about other corporate earnings reports, click here.

Yahoo! has been faring much better than other online media companies as of late. It has benefited from improving online advertising sales and an increased focus on converting users to paid subscribers for services such as e-mail and auctions. Yahoo! broke even in the fourth quarter of 2001 on revenues of $189 million.

Shares of Yahoo! (YHOO: Research, Estimates) edged lower in regular trading Wednesday, but took a bigger hit in after-hours trading, sinking more than 5 percent to $18.50, according to Island ECN. The stock has enjoyed a nice run in anticipation of the earnings report.

Yahoo!'s stock has surged nearly 20 percent so far this year and the shares are now less than 5 percent off their 52-week high. In addition, the stock trades at 78 times 2003 earnings estimates.

Safa Rashtchy, an analyst with U.S. Bancorp Piper Jaffray, said that he thinks the stock fell in after hours trading due to extremely high expectations. He adds that investors may have been disappointed that revenue growth in the fourth quarter was not stronger.

But guidance for 2003 seemed to be on target. For the first quarter, Yahoo! said that revenues should come in at $255 million to $275 million. The low end of that range is below the current consensus estimate of $270 million. The company also projected that revenue for the full year would be between $1.1 and $1.2 billion for the full year 2003, close to estimates of $1.2 billion.

The projected results do not include the impact of Yahoo!'s pending acquisition of search engine infrastructure company Inktomi, due to close in the first quarter.

Terry Semel, Yahoo!'s chief executive officer, was upbeat during a conference call on Wednesday evening. He said that advertising revenue in the fourth quarter increased from a year ago, marking the first time in eight quarters that ad revenue was up on a year-over-year basis.

In addition, Semel said he expected sales in Yahoo's marketing services division, which includes revenue from traditional advertisers as well as paid sponsored searches, to increase 20 percent in 2003. Yahoo! generates revenue for paid searches through a relationship with Overture (OVER: Research, Estimates), a search engine company that allows companies to pay for better placement in search results.

However, Semel indicated that he expected much of the increase in advertising revenues to come from gains in market share and not an improved online ad environment, saying that he "does not anticipate a marketplace that changes drastically from where it is today."

That could be bad news for other companies that have online advertising business segments such as AOL Time Warner, the parent of CNN/Money. In fact, Susan Decker, Yahoo!'s chief financial officer pointed out that with the notable exception of AOL, the online ad market is not too bad for most Internet companies.

Yahoo! still depends heavily on advertising -- marketing services revenues accounted for 62 percent of overall sales, compared to 71.5 percent a year ago. But Yahoo! has been diversifying its revenue stream through acquisitions and new services. Yahoo! acquired job listing site HotJobs.com in 2002 for example.

And Semel said that the company was setting a goal of increasing its number of subscribers for paid services by 50 percent in 2003 with a particular emphasis on its most popular services, including e-mail, personal ads and broadband access. Yahoo! has a joint venture with telecom SBC Communications (SBC: Research, Estimates) in the broadband arena.

But one analyst said even though Yahoo! had a great quarter, there were still some concerns. Jim Preissler, an analyst with Investec, said that most of the marketing services growth came from Yahoo's agreement with Overture and that he would prefer to see Yahoo! post more organic ad sales growth. Preissler does not own Yahoo! and his firm has no investment banking relationship with the company.

Plus, there's the fact that Wall Street was already expecting Yahoo! to do well. So it's better than expected numbers really aren't that much of a surprise.

"These are good results but with this infatuation for the company again, it's getting harder to justify the stock price," Preissler says. "Everybody had already moved their numbers up and I don't think analysts will leapfrog their estimates again."