Yahoo!'s Cheers Don't Inspire Net Sector

The DOT was hovering around break-even early on despite analysts' mostly positive words on Yahoo!.
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SAN FRANCISCO -- Yahoo! (YHOO) was the toast of the Internet town after its stellar quarterly report last night, but the stock was providing only a modest boost to the Net sector early in today's session.

The company posted second-quarter earnings of 11 cents a share, topping the 21-analyst

First Call

estimate by 3 cents and moving ahead of the year-ago 1 cent.

reported on the news in a separate

story Wednesday.

Yahoo! was up 3 11/16, or 2%, at 170 3/4 in recent trading after spiking to a high of 175 1/4 on the opening. Internet Sector

index was lately up 6.31, or 1%, at 660.16. Some of the trepidation in the sector could result from weakness in the broader market. Softness may also be related to the tendency for the sector to trade lower following Yahoo!'s earnings.

This morning, analysts were mostly positive in their thoughts on Yahoo!'s results.

Salomon Smith Barney

analyst Lanny Baker said today that "it is clear that Yahoo! has realized an invaluable and increasingly powerful strategic position within the fastest-growing media and communications market in the world." He reiterated his buy rating and his price target of 230 on the stock.

But while most analysts indicated that the company's numbers were positive, not all the feedback was good.


analyst James Preissler noted that average daily page views marked one area where Yahoo! did not outperform. He said that "if this disconnect between the site's usage patterns (good to modest) and financial performance (very strong) persists, Yahoo! could run into trouble producing enough valuable page inventory to meet the demands of its existing advertising contracts, let alone chase down additional new revenue opportunities."

BancBoston Robertson Stephens

analyst Keith Benjamin said the quarter was "solid," and he expects the stock will react positively to the numbers. He said he continues "to see the value in Yahoo! stock" but was "challenged to figure out how quickly it can grow to much higher levels over the near term."


(EBAY) - Get Report

was hit by a negative piece in the Heard on the Street column in

The Wall Street Journal

today. The article said that some large hedge funds are making big bets against the online auctioneer. A few analysts warn that the coming quarter will be a letdown to some investors and that the second half of the year could bring even more disappointments, according to the article. It also said that eBay could report its first quarter in a long while without profit from operations, with the only profit generated from interest income from its recent follow-on offering of stock.

eBay was 15/16, or 1%, at 137 5/16 in recent action after trading to a low of 131 1/2 earlier.