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Yahoo shares boosted by ratings

Improved ratings from Wall Street analysts in the wake of Yahoo's content deal with Netscape help propel its stock surge.

Bolstered by a deal with Netscape and an increase in analysts' reccomendations, Yahoo (YHOO) shares today continued their two-day rise, gathering enough steam to climb as high as 26 percent during this period.

Shares of Yahoo soared as much as 16.6 percent in morning trading to as high as 28-7/8, up 4-1/8 from yesterday. Yesterday the stock rose 9.3 percent to close at 24-3/4, up 2-1/8 points over Tuesday's close.

Helping to drive up the stock were increases to analysts' recommendations.

Robertson Stephens, for example, upped its long-term recommendation to "attractive" from "market performer."

And the 1998 earnings estimate was raised to 40 cents a share from 33 cents, while revenue estimates were also increased to $82.3 million from $68 million.

Meanwhile, Cowen & Co. analyst Jamie Kiggen today also raised his 1998 earnings estimate to 47 cents a share from 37 cents. Kiggen also reiterated the stock at a "strong buy."

Yahoo's exclusive deal with Netscape to run a cobranded Internet navigation service helped drive these changes. Analysts said they expect that deal to drive advertising sales for the Internet search engine company.

As a result of the deal, Kiggen said he raised his revenue estimates by $7 million in 1997 to $48.5 million in 1997 and increased it by $18 million to $85.5 million in 1998.

Although Yahoo's stock has climbed in the last two days, it has trended down since late January, when it traded in the mid-30s.

"They've been affected by the broader sell-off in technology stocks," Kiggen said. "These kinds of companies are all early-stage companies with business models that are evolving, so there is a high level of uncertainty and risk."

He said it's questionable whether this deal alone will restore Yahoo's share price to late-January levels, but noted he has a $35 price target on the stock that he believes is reachable in the next six to 12 months.

"I'd look for them to do other deals, maybe not this large, but Yahoo is good at expanding the visibility of their brand," Kiggen said.