SAN FRANCISCO (MarketWatch) — Even after Yahoo Inc.’s popular email service suffered a prolonged shutdown most of last week, investors appeared to take the “mail fail” in stride, with shares ending the week up 1.6%.

Yet for all the bad publicity, including thousands of negative tweets — where the hashtag #yahoomail or #mailfail accompanied complaints about the outage — the problem with one of Yahoo’s core products was not a focus for investors. That is because many of them are still trading Yahoo US:YHOO based on the prospects for the upcoming Alibaba IPO. Yahoo owns a roughly 24% stake in the Chinese e-commerce company. It has agreed to sell 40% of that stake in Alibaba’s IPO.

“The key thing to remember on Yahoo is that the stock is driven by Alibaba, and not the core business,” said Colin Gillis, an analyst at BGC Partners, in a phone interview. “It’s all about the IPO, when it is, and what will it be worth.”

And indeed, those expectations keep changing, with the risk of getting over-inflated. At the end of October, Bernstein Research analyst Carlos Kirjner upgraded Yahoo to an outperform, based on the growing expectations for the expected gains it will see from selling part of its stake in Alibaba. He also estimated a $190 billion valuation for Alibaba, which was much higher than previous valuations of between $100 billion to $120 billion.

Yahoo

Most investors remain focused on the possible gains from the Alibaba IPO. Yahoo’s shares are up almost 100% for the year, after starting out in January trading at around $19.86. Despite all the hype that Yahoo Chief Executive Marissa Mayer seems to generate, the company is still not yet growing revenue, as investors saw in October during its last quarterly report.

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It was, in fact, Mayer’s first big and widely touted upgrade of Yahoo Mail that generated one of the first bouts of user criticism. In October, Yahoo unveiled a huge revamp of Yahoo Mail, a redo that made the free email product more like Google Inc.’s GOOG, -2.37% Gmail, which Mayer was once in charge of. The company made its announcement via a Tumblr post noting that Yahoo Mail was “Sweet 16” and lauded the introduction of “conversations” where many emails are grouped together, a feature that also happens to be one of the more irritating elements of Gmail.

Some users were so outraged after the launch of the new email that they created a petition on Change.org, asking Yahoo to bring back its old version of email. Over 40,000 have signed the petition, which states that many have been using the service for over a decade. Late last week, Will Oremus, a Slate writer, noted that when he wrote about the outcry in October, he was “overwhelmed by the response: Rarely have I gotten so many emails on anything I’ve published.”

Late Friday a Yahoo spokeswoman directed reporters to a Tumblr post by Mayer, apologizing again for the prolonged outage, saying that as of Friday afternoon, the company had restored access to “almost everyone.”

“We really let you down this week,” Mayer wrote.

So will a huge group of core Yahoo users and devotees leave the Internet pioneer for good? If so, does Yahoo even care? Its responses to the email issues have been rather underwhelming, with Mayer first tweeting on Dec. 11 an apology for the difficulties, and then later that email was restored. However, some consumers have continued to tweet that their email was still down. Yahoo did not immediately response to a request for comment.

So far, Wall Street doesn’t seem concerned over the potential for losing some of Yahoo’s oldest users. As Gillis noted “it is not positive,” and the problems with Yahoo Mail showed what happens when Internet companies move fast with new product iterations.

UBS analyst Eric Sheridan even wrote in a note last week that he believes Yahoo will be back on the path of revenue growth in 2014, “with an acceleration into 2015” in part due to its new streaming ads, and high-profile media hires, such as Katie Couric and David Pogue, which could drive more user engagement.

With recent acquisitions, such as its deal to spend $1 billion on Tumblr, a photo-oriented blogging site, it is becoming more clear that Yahoo is hoping that some of that user engagement will be with younger millennials, the ones who find texting more efficient than email.

So with the potentially lucrative Alibaba IPO in the very near future, investors probably won’t start looking at Yahoo — both on its own merits and its issues — for quite some time.

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