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First Albany Lowers Yahoo to 'Hold'


First Albany downgraded Yahoo (YHOO) to hold, from buy.

Analyst Youssef Squali says his downgrade of Internet company Yahoo! is based on valuation, and its tepid upward 2003 guidance. He notes the 8 cents second-quarter earnings per share was in line, and the $325 million in revenues exceeded his $309 million estimate. However, higher spending on R&D, general and administrative, and other one-time items cut the second-quarter net margin to 15.8%, vs. 16.5% in the first quarter.

Squali finds the new fiscal 2003 operating cash flow guidance of $375 million to $400 million, up from $350 million to $380 million, somewhat tepid; he says in the two prior quarters, Yahoo upped the guidance by $37.5 million and $22.5 million, respectively. He raised his 2003 revenue, EBITDA, and recurring earnings per share estimates to $1.33 billion, $415 million, and 37 cents, respectively, from $1.3 billion, $406 million, and 36 cents.


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