Yahoo! Shares Plunge to Five-Year Low

Pitz cut his price target on Yahoo! to $16 from $24.

Rob Sanderson, an analyst for American Technology Research was also down on the stock, cutting his price target to $22 from $33, although he maintained his buy rating.

"Yahoo!'s premium display business appears to be facing significant headwinds given the slow-down in several key verticals and general caution among advertising customers," Sanderson wrote in his research. He also pointed to a tough macro environment and Yahoo!'s deteriorating market share in the search business as reason to be cautious on the stock.

Yahoo! has long been considered a leader in display advertising, with the potential for huge growth. The Interactive Advertising Bureau, for instance, had forecast display advertising to grow to over $18 billion in 2010 from $12 billion in 2007.

Google(GOOG Quote) made a wager on display advertising growth as well when it purchased DoubleClick for $3.2 billion. But it is less exposed than Yahoo! because of its heavier reliance on search advertising.

Yahoo! continues to invest in display advertising. In fact, it recently revamped its advertising platform, called APT, to better streamline the process for publishers and advertisers to buy and sell display ads.

But Pitz maintained that while the move would help Yahoo! in the long term, "we believe Yahoo! may struggle to get widespread adoption of APT in the current weak display environment."

Investors might have given Yahoo! a pass in light of all the turmoil in the economy. But many find themselves in a less forgiving mood because of what they see as past blunders, including the failed merger agreement with Microsoft(MSFT Quote) this summer, which drove down Yahoo! shares.