NEW YORK (CNN/Money) - It's been a long time since Martha Stewart Living Omnimedia received news worth cheering.

But a rally in company shares that began in the minutes before Martha Stewart's sentencing Friday morning turned into a full-blown celebration when news broke that Martha Stewart Living's namesake would not be headed to jail for long -- of, for that matter, anytime soon.

Starved investors drove Martha Stewart Living Omnimedia (MSO: Research, Estimates) shares up as much as 42 percent in New York Stock Exchange trading before they fell slightly to close the day at $11.81, up $3.17, or 37 percent.

Despite the giddy spike, consultants who follow the retail and media lifestyle company echoed their longstanding belief that MSO still faces a painful, possibly even fatal, future.

"What did Wall Street see today?" asked Howard Davidowitz, a New York retail consultant and investment banker. "Closure." But Davidowitz said investors will soon realize that the long-awaited sentencing does not mark the end of Martha Stewart's legal woes. Legal experts say the appeals process could take as long as two years.

"The nightmare goes on and when Wall Street finds that out, the stock price goes right back down," said Davidowitz.

Davidowitz and two other consultants say better measures of the company's viability loom. One are second-quarter earnings, which are due to be released next month.

Analysts polled by Thomson First Call are expecting a loss of 32 cents a share for the quarter, compared with a loss of 41 cents a share in the first quarter and a profit of 2 cents a share in the year-ago quarter.

Another approaching indicator: The sales season, when publishers lock up advertising deals for the coming year, is due to kick off later this month and continue into early fall.

For now, the company's prospects appear grim.

Advertisers have fled Martha Stewart Living, the Emmy award-winning Martha Stewart Living TV show will soon go on hiatus, and the company's stock price is, even with Friday's rally, still trading well below its $20 range on the eve of Stewart's indictment two years ago. Nearly 200 employees have lost their jobs.

Stewart, 62, and former Merrill Lynch broker Peter Bacanovic, 42, were sentenced Friday, more than four months after a jury convicted them of lying during an insider trading probe into Stewart's well-timed sale of ImClone Systems (IMCL: Research, Estimates) stock in late 2001.

In a statement posted Friday on her personal Web site, www.marthatalks.com, Stewart said she was "heartsick" about her company's downward spiral and acknowledged that it faces "enormously challenging times ahead."

Company officials issued their own statement Friday reiterating their strategy "to manage the company for the long-term, with a commitment to preserving our many assets and brand labels and evolving MSO as a 'how-to' brand building enterprise."

The company has taken drastic steps to distance itself from Martha Stewart and her name. While Stewart is still the company's controlling shareholder, she is no longer an executive.

Her "Editor's Letter" and "Remembering" column have been dropped from Martha Stewart Living magazine. The flagship publication has undergone a redesign, starting with the September cover, that will highlight the word "Living" and play down "Martha Stewart."

One promising asset in the company's otherwise sagging portfolio is Everyday Food, a year-old magazine whose ad rate base was recently increased.

Experts agreed that it's too late now for the company to drop its founder's name altogether, assuming Stewart would even allow it. There's still a deal with Kmart (KMRT: down $2.18 to $77.06, Research, Estimates), which earlier this year was extended through 2009, to sell Martha Stewart Everyday household items like shower curtains and patio furniture.

The discounter declined to comment on Stewart's sentencing but said in statement that Martha Stewart Living Omnimedia continues to be "a valued brand partner of Kmart." However, the company this week has been running a 25 percent discount on all of Stewart's Everyday Living products at its stores.

Experts say Martha Stewart Living's best hope is to stem the losses until Stewart's legal case is resolved for good, whether she does time in jail or her conviction is overturned on appeal. Still, they predict that the company is unlikely to recapture its former glory.

"The damage was done a long time ago," said Robert Passikoff, president of Brand Keys Inc., a New York branding company. "The competitive landscape is so dramatically changed from two years ago."

The magazine faces strong competition from rival lifestyle magazines like O, The Oprah Magazine and Ladies Home Journal, and competitors have been racing to craft the next domestic diva.

Top contenders include Chris Madden and B. Smith. Madden, a designer, author and TV host, sells a line of home furnishings through J.C. Penney. Smith has her own magazine and television series.

For all the increased competition, Davidowitz said that Stewart still reigns as the queen of domesticity. As unlikely as the prospect seems, he said the best thing she could do for herself and her company is to drop her planned appeal and get her punishment behind her.

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"The company needs Martha back and the worst thing is the uncertainty," he said. "She doesn't have to be CEO. She owns the voting stock so she can still do what she wants with the company. But she can't do anything until this is resolved."