Yahoo! Gets Upgraded to Neutral by SG Cowen - TheStreet

(Updated from 8:28 a.m. EDT)

Internet advertising is back,

SG Cowen

says, and



stands to gain.

After conducting interviews with 40 of the biggest Internet media buyers and sellers, including Web juggernaut

AOL-Time Warner


and advertising firm

Ogilivy & Mather

, Cowen analyst Scott Reamer found the online advertising has seen its worst days. As a result Reamer upgraded Yahoo! to neutral from sell this morning.

"Frankly, we were somewhat surprised by the level of optimism out there, particularly from ad agencies who feel that clients are finally ready to pull the trigger on Internet advertising budgets," he wrote. "We did not hear any instances of Internet budgets being expanded, but certainly the free fall they were in since last summer is over."

The stock is up 1% to $19.66 this morning.

Reamer said that larger advertisers have gotten savvier about how they use the Web, keeping budgets on par with last year's amount, but picking and choosing where to hawk more wisely. Reamer said Yahoo! and other online outlets are becoming more receptive to advertisers' new demands, and better relations with advertisers will result in more money spent.

In early March, Reamer downgraded Yahoo! to sell because of the company's movement out of areas that made them successful in the past. At the time, Yahoo! was courting older, more established companies instead of relying on dot-com businesses. Instead of using the boring banners and buttons advertisements, Yahoo! was creating new types of online ads. And instead of relying on ad sales alone, Yahoo! began selling its business services in an attempt to get more diverse streams of revenue.

"In our talks with agencies, this was the first time we ever heard positive feedback on Yahoo!," he said. "Notably, Yahoo! is reaching out to Madison Avenue like never before." And indeed, on June 7, Yahoo!, with co-founder Jerry Yang in tow, will meet with 125 media buyers in Princeton, N.J.

Out of the five ratings Cowen uses, neutral is smack dab in the center. The analyst said he wouldn't up his rating any higher for now because Yahoo! is so rich on a valuation level and the company isn't going to top expectations, only meet them.

Yahoo!'s shares, stuck in a range between $17 and $22, could very well break out of that trend, according to the analyst, but told investors to be wary of the amount they're spending for the revenue stream and what the Web portal can deliver for second-half numbers. Yahoo!, down 35% year-to-date, is well off its 52-week-high of $150.