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Yahoo rises on upbeat views of advertising

The Web portal's shares rise more than 14 percent after an analyst says the company will top second-quarter expectations as online advertising rates bottom out.

    Yahoo shares rose more than 14 percent Monday after an analyst said the company would top second-quarter expectations as online advertising rates bottom out.

    "Given the expected positive Q2 results, the potential of positive announcements in the next few weeks, the bottoming of the ad market and the new CEO, we believe the stock is likely to trade up in the next few weeks," said U.S. Bancorp Piper Jaffray analyst Safa Ratschy.

    Analysts and industry executives have recently said that the ad market has hit its low, with AOL Time Warner CEO Gerald Levin saying just last week that advertising prices have stabilized. However, they've stopped short of predicting a full recovery.

    The largest Web portal's stock plunged more than 87 percent over the past year on worries about declines in online advertising. However, after Ratschy's comments Monday, shares of Yahoo were up $2.46 to $19.77.

    Analysts surveyed by earnings tracking firm First Call produced a consensus forecast of 2 cents per share on revenue of $174.6 million for Yahoo's second quarter.

    With $127.2 million in deferred revenue from the first quarter, Yahoo can "easily" meet the consensus earnings target for the second quarter, while "easily" reaching revenue of $180 million, Ratschy said.

    Ratschy is among the analysts who believe ad prices have stabilized, though he remained cautious about the rest of the year.

    "Although most of the industry insiders we interviewed believe we have reached the bottom--about 70 percent do--none is ready to say that growth will resume anytime this year, although it is still a possibility for Q4," Ratschy wrote. "In our view, it is a futile attempt to expect any growth this year but we do expect a solid growth in 2002."

    But with a rebound still not in sight, Yahoo's second-quarter results would provide mostly a short-term chance to make money on the stock, rather than a solid long-term investment, the Piper Jaffray analyst said. "We are marinating our 'neutral' rating but note that in the near term, we expect the stock to move faster than the market," Ratschy said.

    Thomas Weisel Partners analyst Gordon Hodge also sees a more stable ad market. But Hodge, who has a "buy" rating on Yahoo, urged shareholders not to focus on Yahoo's returns in the immediate future. "Investors should focus on the long-term franchise value of the company and the near-term initiatives that are being taken to solidify Yahoo's leadership position among online media properties," he wrote.