Wedbush analyst Lou Kerner this morning launched coverage of Yahoo (YHOO) with an Underperform rating and $13.25 price target.
“While we�re impressed with the strategy outlined by [CEO] Carol Bartz, Yahoo is a massive ship to turn around, and competitors are moving forward at a rapid clip,” Kerner writes in a research note. “With page views decreasing and uncertainty surrounding the timing and impact of the transition of the search business to Microsoft, we believe that Yahoo is now an execution story, with no catalysts on the near-term horizon.”
Kerner notes that display advertising is “emerging as the largest part of Yahoo,” but he notes that monthly visitor levels have been decreasing on a year-over-year basis in 11 of its 16 major content and communications properties. “While Yahoo is well positioned to leverage ‘science, art, and scale’ to drive higher pricing, without an ability to organically grow traffic, we believe that Yahoo will be limited in its ability to create shareholder value.”
The analyst contends that the rapid growth of Facebook and other new content sites poses a serious challenge for the company. He says Yahoo is going to have to combine acquisitions with innovation, – “not a Yahoo strength of late” – to maintain the scale needed to drive pricing and revenue growth. “Yahoo�s increasing focus on innovation is to be applauded, but results, not strategies, are needed to drive shares higher,” he writes.
YHOO is down 8 cents, to $13.77.
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