First Albany Lowers Yahoo to 'Hold'

Analyst Youssef Squali thinks the Internet company's upward guidance for 2003 is tepid, compared with prior quarters

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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