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Yahoo Plunges to 2-Year Low on Sales Comments

November 22, 2000|From Bloomberg News

Internet portal Yahoo Inc., once a $250 stock, saw its shares crumble below $45 on Tuesday amid a rash of negative comments by Wall Street analysts.

Yahoo (ticker symbol: YHOO) plummeted $7.19 to $41.69, a two-year low, after Morgan Stanley Dean Witter & Co. analyst Mary Meeker said there is a 30% chance the company's sales could miss estimates in its next three quarters.

Other analysts also weighed in, driving a number of key Internet stocks to their lowest prices in at least a year.

Worries about the growth of advertising on Web sites such as Yahoo's have mushroomed since a number of Internet companies reported slowing third-quarter sales, as other online businesses cut marketing spending.

Meeker said in a report Tuesday that she places the odds of a revenue forecast "miss" at 30% in coming quarters for Santa Clara, Calif.-based Yahoo. She didn't return telephone calls seeking comment.

Wit SoundView analyst Jordan Rohan also told clients that the ad sales outlook is worsening amid a slowing economy and as Yahoo competes with media giants such as Walt Disney Co. for Net ad dollars.

"The first quarter of next year looks awful," said Rohan, who cut his Yahoo sales estimate for the period to $316 million, from $328 million earlier this month. "Consolidation, attrition and fear" are behind the ad slowdown, he said.

Yahoo spokeswoman Nicki Dugan declined to comment on "market speculation, quarterly earnings or stock price."

Meeker said Yahoo has taken steps to "broaden its revenue streams from its 90% reliance on Internet advertising."

But among the biggest Internet companies such as America Online (AOL), EBay (EBAY) and Amazon.com (AMZN), Yahoo is most at risk because it relies so much on advertising, Meeker wrote.

Henry Blodget, Net analyst at Merrill Lynch & Co., said Tuesday in a research note that Yahoo is "currently facing [the] toughest challenge of [its] young life" and that he believes its first-quarter "numbers are at risk."

Competition for advertising dollars has escalated because there are many more Internet sites vying for the same business. Amazon.com, the largest Internet retailer, said in September that it is going to stop advertising on Yahoo in favor of AOL.

Yahoo also suffered Tuesday in the wake of Monday's decision by a French judge ordering the Internet firm to bar French users from sites selling Nazi memorabilia.

Under the French court decision, Yahoo must prevent French users from visiting English-language auction sites where Nazi books, weapons, badges and uniforms are offered for sale.

In other legal news, a Taiwan Web site threatened to sue Yahoo China, alleging that the portal used the Taiwan firm's copyrighted material on its Chinese Web site, lawyers representing the firm said.

"Today 40% of Yahoo's traffic is outside the U.S. If it's not monetized effectively, an important part of growth goes away," said Andrea Rice, analyst with Deutsche Banc Alex Brown.

Even at its current price, Yahoo's stock trades for 72 times the 58 cents a share it's expected to earn in 2001, according to analysts' consensus estimate.

The Net's Mounting Casualties

Many major Internet-related stocks fell Tuesday to their lowest levels in at least a year, as analysts made negative comments about ad sales on key Web sites. A sampling of Net stocks:

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Ticker 52-week 52-week Tues. close Stock symbol high low* and change Amazon.com AMZN $113.00 $19.38 $24.25, -$1.56 America Online AOL 95.81 37.00 43.00, -4.56 CMGI CMGI 163.50 10.63 10.94, -1.13 EBay EBAY 127.50 30.75 31.56, -2.94 EToys ETYS 70.50 1.22 1.28, -0.22 Excite@Home ATHM 59.75 7.25 7.31, -1.22 Infospace INSP 138.50 14.13 14.31, -2.50 Inktomi INKT 241.50 35.00 36.25 -5.81 Internet Capital ICGE 212.00 6.00 6.34, -1.06 Multiple Zones MZON 17.00 3.06 3.06, -0.19 Priceline PCLN 104.25 2.25 2.31, -0.13 VerticalNet VERT 148.38 12.63 13.00, -1.13 Yahoo YHOO 250.06 40.56 41.69, -7.19

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* Including Tuesday's intraday low

Source: Reuters

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