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Analysts React to Yahoo Warning

  • Summary: The following is a summary of analyst reactions (and their current ratings, if any) to Yahoo’s (YHOO) warning that ad growth is slowing, primarily on its auto and finance sites:

    1. Zack's Equity Research: Analyst Steve Biggs (“Buy” with a $40 price target) posits that Yahoo has more exposure to traditional advertising (including auto & financial services), as opposed to Google’s (GOOG) reliance on “paid search”, which is a more attractive (advertising) option for small companies.
    2. WR Hambrecht & Co.: Analyst Denise Garcia (“Buy”) is still bullish on internet advertising. Despite weak spending from the auto and financial services sector, Denise still expects on-line advertising growth to hit 29% this year.
    3. Riley Asset Management: CEO Ned Riley said that as internet advertising matures and takes market share from print advertising, it becomes more exposed to general economic cycles. Internet advertising has a growing exposure to a slowing economy.
    4. Miller Tabak: Equity strategist Peter Boockvar sees the Yahoo warning as a reflection of a slowing US economy. Since auto and financial services are heavy advertisers, companies relying on advertising income will feel the pinch.
    5. Piper Jaffray & Co: Analyst Safa Rashtchy (“Outperform”) thinks that the slowdown in auto advertising is temporary, and will pick up as new car models are launched later this year and early next year.
    6. Cowen & Co.: Analyst James Friedland (“Outperform”) is concerned that this can become an issue for the entire online advertising sector. His “big question” is whether or not this will hit search side advertising, i.e., Google, as well.
  • Links to related articles on Seeking Alpha: Piper Analysts Recommend Yahoo Following Recent SelloffMessage from Yahoo's Warning: Broader Economy Still Impacts Online Properties.
  • Conference call transcripts: Yahoo Q2 2006, July 18, 2006

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Source: Six Wall Street Reactions to Yahoo's Warning