Shares of both companies fell roughly 5 percent each in late morning trading, pushing Yahoo to $30.49 a share and Google to $185.25. The broader markets, however, were up during morning trading.
"We had hoped that momentum in paid search from the fourth quarter would carry through to first-quarter results," Jordan Rohan, an analyst with RBC Capital Markets, said in his research note on Yahoo. "But now we believe otherwise."
Rohan, citing checks with the companies' channels for selling online ads, downgraded Yahoo to the equivalent of a "hold" from a "buy." And he downgraded Google to the equivalent of a "hold" from a "strong buy."
In the case of Google, Rohan projected the company would increase its first-quarter revenue 5 percent from the previous quarter, rather than the 13 percent jump he previously forecast. Wall Street expects the company to generate a 13 percent increase.
Earlier in the week, David Garrity, an analyst with Caris & Co., downgraded Google to a "buy" from a "strong buy," according to Thomson Financial. Garrity had also cited similar concerns in his research note.
"We view Google as likely to remain the paid search advertising leader and stand by our financial projections," Garrity said in his research note. "That said, however, we see few near-term catalysts likely to drive valuations higher."
Garrity pointed to preliminary fourth-quarter industry figures released on Tuesday by the Interactive Advertising Bureau, which cited revenue figures from online ads that were below his industry projections for the three-month period.
The bureau estimated fourth-quarter revenue of $2.7 billion, while Garrity had expected the industry to generate $3.34 billion in revenue for the quarter.
That said, a number of industry analysts recently upgraded Yahoo and Google after the companies reported their fourth-quarter results. Yahoo posted stronger-than-expected, as did .
According to Thomson Financial, three analysts have upgraded Google since it reported its fourth-quarter results Feb. 1, compared with the two downgrades. Yahoo received four upgrades and one downgrade after it reported fourth-quarter results in mid-January.