Eyeing Yahoo On Recent Weakness (YHOO)

Mar.16.06 | About: Yahoo! Inc. (YHOO)

Today I am watching Yahoo! (YHOO) The stock is currently trading in the low $30’s, down from a recent high of $43.66 set on January 9th, 2006.

I believe YHOO’s recent drop has much to do with the drop in Google (GOOG). Google has dropped over a variety of problems that have created investor fear and that fear is likely trickling over to Yahoo. Google is facing some difficulties from click fraud lawsuits, public backlash over its decision to censor content in China, accelerating revenue to exceed the high expectations of analysts, and in creating new services to maintain the company’s amazing growth rate.

I believe Yahoo is an older and more mature company in the search market. I like the company’s conservative approach to using capital and rolling out new services. Yahoo recently scrapped plans to create its own customized content and the company is slowly rolling out its Yahoo Publisher service for advertisers.

Yahoo appears to have learned several lessons from the .com crash that collapsed high flying companies that were spending money without realizing any revenue from the services they created.

I originally purchased YHOO at $33.97 and I sold the stock at $38. I believe negative sentiment may build around Google, and YHOO shares will likely drop further as an after effect. I like YHOO at under $28. The stock is currently trading at low $30’s.