Yahoo shares drop to two-year low

Yahoo's stock plunged to its lowest level in two years Tuesday after investors reacted to analyst reports reiterating concerns about weakness in the Internet advertising sector.

Yahoo shares fell $7.19,

Yahoo Stock price from November 1999 to present.

Source: Prophet Finance

or about 15 percent, to $41.69 by the 1 p.m. PST close of regular trading. Earlier in the day, the stock dropped to $40.56, the lowest the shares have traded since November 1998. The shares peaked at $250.06 last January.

Reports by Merrill Lynch analyst Henry Blodget and Morgan Stanley Dean Witter analyst Mary Meeker spurred the decline, although they largely repeated previously stated forecasts that companies reliant on Internet advertising will struggle into the second quarter of next year.

Meeker estimated that Yahoo had a 30 percent chance of missing revenue targets in the next two quarters.

Yahoo's stock also suffered following an order by a French judge that it must block French Web surfers from Internet sites that sell Nazi memorabilia.

Robertson Stephens analyst Lowell Singer said Tuesday there is little new information on Yahoo, but investors seem to be driving the company's stock down every time a report comes out addressing the slowdown in Internet advertising.

"I think it's a very, very nervous market, and negative news tends to get exaggerated," he said. "I think these stocks are getting disproportionately hit right now."

Still, Singer said he did not predict a rebound in Yahoo's stock until some significant progress was made concerning Internet advertising.

"There are a bunch of catalysts that will do this, things like increased broadband penetration and advertising agencies continuing to focus on creative ways to bring offline advertisers online," Singer said.

Meeker noted in her report that Yahoo has taken steps to expand its revenue sources; Net advertising now comprises 90 percent of its revenue.