Yahoo!'s Panama Pain

RBC Capital Markets analyst Jordan Rohan, who rates Yahoo! shares outperform, was even blunter. He argues in a note to clients Wednesday morning that Yahoo! management lost "credibility due to the delay." Rohan reduced his price target from $40 to $33 and trimmed his 2007 earnings per share estimate by a nickel to 78 cents.

"The problem that exists with Yahoo! today is that in its zealous pursuit of secrecy related to Project Panama -- which in our opinion is a bit of a misguided pursuit -- the company caught investors off guard," Rohan writes. He says the stock reacted to "poor investor communications around a reasonably explainable slip in a product release schedule." His firm makes a market in Yahoo! shares.

Data from comScore continue to show that Google is gaining market share at the expense of Yahoo! and its other rivals on a year-over-year basis. Yahoo! says comScore's data aren't accurate.

Analysts aren't quite ready to give up on Yahoo! quite yet, because the company is continuing to benefit from the shift of advertising dollars online. For its quarter ended June 30, the company made $164 million, or 11 cents a share. Revenue, excluding the money Yahoo! shares with search-advertising partners, rose 28% from a year earlier to $1.12 billion. Analysts surveyed by Thomson Financial expected a profit of 11 cents on sales of $1.14 billion.

"Despite the delay in the upgrade of its search advertising platform, and declining search market share, we expect Yahoo! to benefit from the secular growth trend in online advertising, driven by its dominant position in graphical advertising," writes Cowen analyst Jim Friedland, who maintains his outperform rating, in a note to clients. Cowen also makes a market in the shares.

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