Yahoo! Fans Pipe Up

Fans look to Google for affirmation.
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Investors shouldn't let

Yahoo!'s

(YHOO)

disappointing fourth-quarter earnings and declining search-market share prevent them from buying shares in the most popular Web site, Wall Street analysts say.

"We expect brand advertisers to rapidly increase online spending in 2006, and Yahoo!'s reach is still unmatched, thus should be one of the primary beneficiaries of this media spending shift," writes Safa Rashtchy, an analyst with Piper Jaffray, who rates the shares outperform, in a note to clients Monday.

Shares of Yahoo! have dropped 12% since the company's Jan. 18 earnings report. Since then, analysts have been encouraging investors to snap up the shares, arguing that the selloff was overdone. Four have upgraded the stock and 20 have maintained their existing reasons.

One of the reasons for the decline in the price is concern about

Google

(GOOG) - Get Report

continuing to gain market share at Yahoo!'s expense. Chief Financial Officer Susan Decker recently said that it wasn't Yahoo!'s goal "to be the No. 1 search engine."

To be sure, Yahoo! will continue to attract a fair number of users by offering them services that they can't get on Google. For example, the Sunnyvale, Calif.-based company can benefit from the growing popularity of social networking sites such as

myspace.com, where people chat with their friends, says WR Hambrecht analyst Denise Garcia, who upgraded the stock from hold to buy today. She also boosted her price target to $42 from $40.

"There is more information that can be found online than is available the Google way through mathematics or algorithmic-based search," she says in an interview. "There is value in the collective knowledge of users."

Last year, Yahoo! began offering users a service that lets them post questions that are answered by other people. The company's Yahoo! 360 service, which is being tested, allows people to put their personalized information, such as blogs and photos, in one spot.

In December, Yahoo! acquired

del.icio.us, a service that lets people organize information they find on Web sites, blogs and podcasts. The company also acquired the photo-sharing site

www.flickr.com in March.

"Yahoo!'s progress in this emerging area of search will undoubtedly revitalize and strengthen its core search product by differentiating itself from Google and providing a search service that compliments more than competes with Google's search product long term," Garcia writes in a note distributed to clients Monday.

The next milestone for Yahoo! investors will be Google's fourth-quarter earnings report Tuesday. A strong Google report might give investors optimism that Yahoo!'s search business will benefit from some of the momentum seen by Google.

Shares of Yahoo! fell 7 cents to $35.02.