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Yahoo! Inc. fell Thursday for the second day in a row, reaching a 52-week low after yet another analyst expressed concern about the effect of slowing Internet advertising sales on the company.
Yahoo! dropped 2 9/16 to 34 15/16 after W.R. Hambrecht analyst Derek Brown cut his investment rating on Yahoo! to neutral from buy, saying a weak market for online advertising could hurt the company through next year.
Brown said the downgrade reflects "continued advertising weakness."
The current quarter, Brown wrote in a research note, "is proving to be extremely challenging for all participants." He noted, however, that the comments "are meant only to reflect near-term conditions, not long-term questions about the viability of online advertising."
On Tuesday, a research report from Merrill Lynch analyst Henry Blodget sent Yahoo! shares plunging. Blodget said he cut his first-quarter revenue estimate for Yahoo! to US$290 million from $324 million, and lowered his second-quarter estimate to $330 million from $338 million, citing a "lousy" advertising climate.
Blodget, however, said he expects the stock to rebound in the second half of next year, and kept his full-year estimate for the company's revenue to $1.45 billion.
Last week, Scott Reamer at SG Cowen Securities also lowered revenue expectations for Yahoo!, which analysts say is heavily dependent on advertising revenue. Analysts at other firms have lowered ratings on the stock in recent months. In October, SG Cowen and Dain Rauscher Wessels both downgraded Yahoo! from strong buy to neutral, and Janney Montgomery Scott downgraded the company from accumulate to hold.
Online advertising companies are feeling pressure from continued cutbacks in
spending by dot-com advertisers. DoubleClick and 24/7 Media are among
companies to announce layoffs in recent weeks.
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