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The early word on Yahoo's Panama ad system has been good. Perhaps too good, according to one analyst.

Todd Greenwald, an analyst at Nollenberger Capital, said in a research note this week that Yahoo's Panama system "is not an end-all, be-all savior." Greenwald, who started coverage of Yahoo with a neutral rating, says that early chatter about Panama's success has been "inconclusive for the most part."

Greenwald's biggest concern: Expectations are too high for Panama. Given the reaction of Yahoo shares, up 40 percent from recent lows, it appears as if investors are assuming that Yahoo will close the price per click gap with Google quickly.

"Expectations for Panama among the media and investors appear very high, with many assuming that it will handily drive much higher click-through rates without any deterioration in price-per-click, closing the monetization gap with Google over the next few quarters."

Indeed, Greenwald adds that it has taken Google five years to refine its text ad algorithms. Meanwhile, Yahoo management has indicated that Panama will take time to "learn" and become more efficient at driving ad prices.

There's no doubt that Panama is critical to the Yahoo turnaround. But thus far there's no hard data on how Panama is performing. That'll change in a few weeks when Yahoo reports its first quarter earnings. 

Source: Yahoo: Expectations Too High For Panama?