Some Analysts Still Comfortable with Yahoo!

Not even upbeat comments from a leading investment firm can help stem the slide in Yahoo! shares.

After setting a new two-year low yesterday, the stock continued lower on Wednesday down another 6 percent.

Tuesday’s 15-percent tumble was sparked by investor fears regarding advertising revenue when Wall Street analysts Mary Meeker and Henry Blodget questioned its ability to meet projected quarterly numbers. News that Yahoo! Senior Vice President Heather Killen was positioning herself to unload 233,000 shares via Goldman, Sachs — in a transaction expected to net about $13.6 million — added fuel to the fire.

This morning, Goldman, Sachs stated Wednesday that they remain comfortable with their estimates for Yahoo!Goldman analysts Michael Parekh and Kevin M. Flaherty said Yahoo! investors should take heart.

“While we noted in Q3 that we expected the next couple quarters to represent a transitional period in the Web advertising market as ad spending by the weaker dotcoms diminished while traditional advertisers continue to commit more ad dollars to the Web, we believe that our Q4 estimates for Yahoo! are reasonably conservative in light of market conditions,” Parekh and Flaherty wrote Wednesday.

The two analysts estimate Yahoo! will achieve revenue of $317.7 million for the quarter — about 13 cents per share — representing 7.5 percent sequential growth over the third quarter. Yahoo! had 8.3 percent sequential growth in the third quarter.

“In light of the seasonally stronger quarter for ad/commerce, we believe that our estimated revenue growth of 7.5 percent for Q4 is conservative despite the continued choppiness in the advertising market,” they wrote.

The added, “We would also note that sell-side and investor fears of a missed quarter came out in front of Q2 and Q3 earnings, yet the company beat our estimates both times. While uncertainty on revenue visibility is generally highest during weak periods for the industry, especially on a quarter over quarter basis, we would highlight that this is a company that grew 90 percent in year over year revenues, and should be able to demonstrate strong growth over the next two to three years given the secular trends in Internet adoption (note that our conservative published estimates call for 30 percent year over year growth).”

Parekh and Flaherty warned that the stock price will likely remain volatile in the near term, but said patient investors should view periods of weakness as long-term opportunities.

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