Yahoo may not be doing so bad by itself without Microsoft, said one analyst in a research note.

J.P. Morgan analyst Imran Khan repeated his Overweight rating and $19 price target on Yahoo shares, which caused shares to rise on Friday.

Until this point our Overweight thesis on Yahoo! was predicated on a potential search deal with Microsoft. However, we are now seeing data which leads us to think that Yahoo! is showing signs of improving fundamental strength, Khan said in a research note.

Online display advertising has been hurt by the economic downturn, but Khan wrote that Yahoo seems to be gaining share on display advertising: In Q1, its revenue in the category was off 13% year over year, compared to an 18% drop at AOL and a decline at Microsoft of more than 20%.

“When the economy recovers, we think spot buying will bounce back with YHOO best positioned to gain market share,” he contends.

J.P. Morgan analyzed 10 of the top online publishers, including companies such as MSN, AOL, Fox, CBS and the New York Times Digital, and found that Yahoo performed better on average.

Yahoo has taken advantage of the opportunity to grow its market share as advertisers consolidate spend and shift toward online opportunities, the report said, attributing the decline in the overall display ad market to weakness in vertical advertising categories such as automotive that are likely to bounce back soon.

Khan wrote that the amount of time Web surfers spent on Yahoo pages rose 10 percent in the first quarter, better than the 2 percent increase in overall Internet time.

He also says Yahoo’s search share seems to have stabilized, with 20.7% in Q1, versus 20.5% in Q4.

Yahoo's stock closed up 75 cents, or 5 percent, to $15.84.