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Yahoo! stumbles on downgrade

Yahoo! (Nasdaq: YHOO) slipped Friday morning after Deutsche Banc Alex Brown analyst Andrea Williams Rice cut her rating on the stock, along with some other Internet companies.

Shares were down 6 3/4 to 115 3/8, or 5 percent. The company's business continues to grow, even while its stock has declined.

The stock was downgraded to "buy" from "strong buy," along with Safeguard Scientific Inc. (NYSE: SFE), FairMarket Inc. (Nasdaq: FAIM) and TMP Worldwide Inc (Nasdaq: TMPW). Rice cited slower-than-expected revenue growth and valuation issues, although she did not revise downward any of her earnings estimates.

Though top Web properties are least susceptible to the dotcom pullback, they are still likely to see slowing growth in the second half of this year, and into 2001, Rice added.

Second quarter conference calls may not be as uplifting as in the past, she added.

Rice cited investors' increasing concern with valuation in the current market environment, and named Inc. (Nasdaq: HOTJ) and Inc. (Nasdaq: BOUT) as best-positioned to sustain the revenue growth necessary to justify a 30 percent annual rate of return for investors.

But she also included in a list of companies that are vulnerable to slow revenue growth due to pullback. Others on the list include FairMarket, Lycos Inc.(Nasdaq: LCOS), Yahoo! and America Online Inc (NYSE: AOL), according to the report.