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ANALYST WATCH: Waiting for the next great &#039Net wave

You have to feel a bit sorry for Internet analysts these days. Just when it seems the market's ready to give some of these boom-and-bust offerings a second chance, the macroeconomic climate takes a turn for the worse and the analysts start scrambling.

Now instead of trying to call the top of April's ridiculous Internet run-up, analysts are in the peculiar position of trying to galvanize enough strength to call the beginning of another run-up.

But it's not such a bold move, what with stocks such as Yahoo! Inc. (Nasdaq: YHOO), America Online Inc. (NYSE: AOL) and Amazon.com Inc. (Nasdaq: AMZN) trading between 35 percent to 50 percent off their 52-week highs.

Lehman Brothers analyst Brian Oakes upgraded Yahoo! from a "neutral" recommendation to "outperform" and set a 12-month price target of $185 a share.

CIBC Oppenheimer's new analyst John Segrich was even more aggressive, starting Yahoo! with a "strong buy" rating along with eBay Inc. (Nasdaq: EBAY) and America Online Inc. (NYSE: AOL).

Yahoo! shares moved up close to $170 a share Friday, an impressive leap from the $120 a share it was trading at just three weeks ago.

Segrich, who replaced Henry Blodget, also started AOL with a "buy" recommendation.

Despite these votes of confidence, there's some serious debate among analysts regarding the future of the world's largest online service provider.

FAC Securities analyst James Sadler had the audacity to cut AOL from a "buy" rating to "neutral" on pricing concerns.

"It's a trend I don't think I can ignore," he said in a research report. "It's loud enough now."

Speaking of trends, BancBoston Robertson Stephens' NETDEX index jumped 6 percent this week to 528.17 compared to a 4 percent rise in the Nasdaq composite. Still, the index is down 34 percent from its all-time high established in April, but up 19 percent from its August lows.

"We continue to recommend broader exposure to the group," analyst Keith Benjamin said in a research report. "For example, we would encourage investors to focus on some of the more recent IPOs of emerging companies such as Cobalt, Student Advantage, and Stamps.com.

"Of the more established names, we believe investors have grown to appreciate the power and profitability of Yahoo! brand and model, helping to keep that stock moving faster than the group's average."

All of the analysts believe Yahoo! will raise its advertising rates next week, sparking the stock's growth and some legitimate news on which to base these upgrades.

Benjamin also points out that some of the upward movement in these 'Net stocks is a result of short covering. E-tailers such as Amazon.com, eBay and Priceline.com Inc. (Nasdaq: PCLN), which got hammered this week, have the most short positions.

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