Will Panama Save Yahoo?

It is no secret that Yahoo! Inc.’s (YHOO) search business has been suffering at the hands of Google Inc. (GOOG), but its new search advertising system, dubbed Project Panama, could help Yahoo re-gain some of this lost market share.

Yes, people still Yahoo, and the earlier-than-expected release of the new system planned for Feb. 5, could drive more ad clicks.

RBC Capital Markets analyst Jordan Rohan has hiked his 12-month price target on Yahoo shares to US$31 from US$30, and sees its long-term value exceeding US$35 per share.

He said he had already factored in the conservative guidance that Yahoo unveiled on Tuesday, and thinks investors did the same.

As a result, Mr. Rohan has not made any material adjustments to his outlook, but will be watching the Panama situation closely, as advertisers make the transition to the new platform.