Todays ws humor->SAN FRANCISCO (CBS.MW) -- While Merrill Lynch is being derided for pumping Internet stocks to receive investment-banking business, the company's Internet analyst has downgraded the highest-profile Net stock of them all: Yahoo.
Justin Baldauf, who replaced former Internet analyst Henry Blodget, dropped Yahoo rating to a "neutral" from an intermediate "buy." This is Merrill's lowest rating ever on Yahoo shares.
The shares (YHOO: news, chart) lost more than 12 percent, falling to $16.20.
A court filing by New York Attorney General Eliot Spitzer alleges that Merrill "published on a regular basis ratings for Internet stocks that were misleading because ratings in many cases did not reflect the analysts' true opinions of the companies." See David Callaway's commentary.
Yahoo's latest quarter was "solid" but "unspectacular," Baldauf wrote. The company delivered only modest upside and management maintained its cautious stance on the near-term outlook for its core business, he wrote. See Yahoo report.
In order to sustain a stock price of $18, Yahoo needs "significant upside surprises and increases to financial targets," Baldauf wrote.
Merrill now joins the ranks of CS First Boston, Deutsche Bank, JP Morgan, Legg Mason, Prudential Securites, Robertson Stephens, and UBS Warburg, which all have "neutral" ratings on the stock. Merrill's Baldauf still maintains his long-term "strong buy" on the shres.
Only one analyst, Derek Brown of W.R. Hambrecht, has had a "sell" rating. He slapped it on Yahoo back on March 6, writing: "There were no obvious indications in first quarter, Yahoo's valuation is exorbitant and not at all reflective of the company's fundamentals or near-term growth prospects. Accordingly, we suggest investors sell into strength and put their money to use elsewhere."
Online advertising
Of Yahoo's total sales, 63 percent came from online advertising. To that end, Yahoo remains a proxy for the health of the online advertising market.
Yahoo's online advertising dollars fell 14.8 percent from the same period a year ago. From the fourth quarter, Yahoo's online advertising dollars in the quarter fell by nearly 11 percent.
AOL Time Warner (AOL: news, chart) is expected to see online advertising dollars fall by 27 percent to between $475 million and $500 million, according to some analysts' estimates. AOL Time Warner reported $653 million in online advertising and commerce.
TheStreet.com (TSCM: news, chart), an online financial news site, said that its advertising dollars fell by 32 percent from last year to $700,000.
TheStreet.com also reported that subscription sales rose 47 percent to $3 million from the same period a year ago.
Where are they now?
Every Friday beginning in May, this column will take a look at movers and shakers -- entrepreneurs, moneymen/women -- who took part in the tech boom. Who would you like to read about?
E-mail: bfrancisco@marketwatch.com
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Bambi Francisco is Internet editor of CBS.MarketWatch.com, based in San Francisco. |
