Internet advertising looks like it will continue its recovery this year. And that's good news for Yahoo! ( YHOO).The Internet bellwether, slated to report first-quarter results after the market's close Wednesday, has Wall Street's blessing as the beneficiary of a rising tide in online advertising. Analysts' reports going into the earnings call indicate that Yahoo! -- whose stock has more than doubled over the past year and trades at more than 90 times estimated 2004 earnings -- still hasn't worn out its welcome on the sell side. Now, all the company has to do is put to rest some lurking concerns about overvaluation -- including that of minority-owned Yahoo! Japan -- and competition from privately held Google. Yahoo!'s shares -- which hit a 52-week high of $50.99 on Monday -- fell $1.22 Tuesday to close at $48.77.
Among his caveats, however, Mahaney notes that Yahoo! is a high-beta stock and that it's trading at a high ratio of revenue to earnings, on the basis of generally accepted accounting principles.