UPDATE 1-RESEARCH ALERT-Collins Stewart raises Yahoo to buy

(Adds details, share movement)

Nov 4 (Reuters) - Collins Stewart raised Yahoo Inc (YHOO.O) to "buy" from "hold," citing in part a possible search deal with Google Inc (GOOG.O) or Microsoft Inc (MSFT.O) and lower threat from social media sites.

The brokerage said the approval of the deal with Google by the Department of Justice would mean an addition of $250 million to $450 million to its operating cash flow.

If the deal failed to get approval, it would increase the likelihood of a deal between Yahoo and Microsoft, said Collins Stewart, adding that it believed the probability of a Google-Yahoo pact getting approved was 40 percent or less.

"We have consistently maintained that there is no other company that needs Yahoo as much as Microsoft and that MSFT does not have a Plan-B to ramp up its Search without YHOO," the brokerage said in a note to clients.

The brokerage also said being the largest premium display advertising provider, the company was most affected from the rise of social media but added that the growth of social media has tapered down and is no longer a threat to Yahoo.

Collins Stewart set a price target of $18 on the stock.

Shares of the company were up 23 cents at $12.98 in early morning trade on Nasdaq. (Reporting by Aftab Ahmed in Bangalore; Editing by Amitha Rajan)