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Sept 12 Jefferies & Co cut its price target on
the stock of internet giant Yahoo Inc (YHOO.O) to $26 from $28,
citing slower advertising and international markets.
Increasing number of advertisers are allocating their
budget to "more performance-oriented channels, particularly
search, and away from brand building formats such as display
and sponsorships, where Yahoo dominates," analyst Youssef
Squali said in a note to clients.
However, there is a possibility of an upside to Yahoo's
stock if the company's proposed search-advertising partnership
with Google Inc (GOOG.O) goes through, the analyst said.
Google, with more than 60 percent of the internet search
market, and Yahoo, with 16.6 percent, agreed in June on an
advertising partnership under which Yahoo will let Google put
search ads on its site.
However, the deal has raised concerns that it will give
Google too much power in the $65 billion online advertising
market, and the U.S. Justice Department launched a formal
antitrust investigation in July.
"Recent signals from the DOJ suggest that scrutiny of the
deal will intensify in the coming weeks, which may delay its
implementation," analyst Squali said.
"With the stakes running so high on both sides, and given
the highly charged environment, we peg the possibility of the
deal going through at 50/50 at this point."
If the deal with Google falls apart due to regulatory
issues, Yahoo could still potentially outsource 100 percent of
its paid search to Microsoft Corp (MSFT.O), if agreeable terms
are reached, Squali added.
The analyst lowered his 2009 earnings estimates for Yahoo
to 55 cents a share, from 64 cents a share, and said the deal
with Google could boost his estimate by 15 cents.
However, Squali maintained his "buy" rating on Yahoo stock.
"At current levels, we find the stock to be washed out and
expectations non-existent, making the stock attractive."
Yahoo shares, which touched a more than four-year low of
$17.25 earlier this week, closed at $18.55 Thursday on Nasdaq.
(Reporting by Anurag Kotoky in Bangalore; Editing by Himani