Andrea Williams Rice, an analyst at Deutsche Banc Alex Brown, on Monday predicted Yahoo's stock could dip as low as $17 a share to meet a more appropriate earnings-per-share ratio. Robertson Stephens' Lowell Singer cut his revenue estimates and downgraded his recommendation to "long-term attractive" from "buy." And Wit SoundView's Jordan Rohan downgraded Yahoo to a "hold" from a "buy."
Yahoo stock fell $1.06, or about 3 percent, to $33.88 by the 1 p.m. PST close of regular trading Monday. Earlier in the day, it hit a new 52-week low of $30.63. The company's stock has been hammered lately, down 85 percent from its 52-week high of $250.06.
Wall Street has sung the same tune about Yahoo for months. A spate of analysts have issued revenue adjustments or downgraded ratings unanimously because of Yahoo's dependence on advertising revenue.
"Given this softening, we believe that there is less visibility into Yahoo's advertising business, which generates more than 80 percent of the company's revenue," Robertson Stephens' Singer wrote in a note to investors.
Online advertising has struggled partly because the souring market has dried up financing for Internet companies, which supplied the lion's share of online advertising dollars. Many companies desperate for more investment dollars remain cash strapped or have simply withered away, leaving a potential gap in Yahoo's advertising revenue.
The advertising growth slowdown is not solely an online phenomenon. Earlier this month, Universal McCann predicted that advertising spending in all media formats will increase only 6.3 percent to $151.8 billion next year. In contrast, national advertising spending grew 11.8 percent to $142.7 billion this year. Much of the slowdown comes after a strong year of spending from the elections, the Olympics and Internet companies that still had advertising budgets.
Newspaper companies such as Dow Jones and Gannett have warned that the coming year will be challenging because of weakening advertising and rising newsprint costs.
Yahoo has said that many traditional advertisers continue to jump on board, offsetting losses from struggling start-ups. However, Wall Street analysts have expressed skepticism that traditional advertisers are coming on board as quickly as Yahoo had hoped.
At the same time, analysts including Williams and Singer have expressed concerns that Yahoo has relied too heavily on attracting advertisers and not enough on developing new revenue streams. Thus, it may behoove the Web portal to entertain ideas of finding a partner with whom to weather the storm, according to Deutsche Banc Alex Brown's Williams.
"Yahoo, in our opinion, needs an offline partner, preferably one that strengthens them in Europe or Asia," she wrote. "The company has wisely resisted any temptation to acquire or be acquired by an offline partner to date, but new times require a new strategy."
Williams suggested Yahoo partner with either a media company to increase its list of content brands or a wireless company to expand in Europe or Asia.