Yahoo! (Nasdaq: YHOO) rose over 4 percent Thursday on the backs of upgrades, one of which cited increasing ad rates for its bullish outlook on the leading Internet portal.
Shares were up 6 1/8 to 159 9/16 Thursday, below their 52-week high of 244.
Lehman Brothers analyst Brian Oakes upgraded his rating on Internet media network Yahoo! Inc. to "outperform" from "neutral" and set a $185 target price on the stock with expectation for higher advertising rates ahead. He also upped the 2000 earnings estimate for the company to $0.56 from $0.52.
On September 15th, Yahoo is expected to announce its new rate card to advertisers for the year ahead, which is expected to have rates 15%-20% higher. "This move will eliminate the view that Internet advertising rates are falling, and goes a long way in alleviating our concern that portals are commodities," wrote Brain Oakes in a report.
"The Internet market is ripe for higher rates given the large amount of newly public companies, flush with cash, needing to grow their business, and the top traffic sites, such as Yahoo, are increasingly "must buys'," according to the report.
The word on Internet advertising has been that rates were falling due to excess inventory from new competitors - a classic supply/demand issue. According to this report the higher price advertisers may be willing to pay for Yahoo! space may eliminate a "major overhang for Yahoo."
Yahoo!'s total number of advertisers reached 2,700, up 50 percent, with average revenues per advertiser reaching over $47,000, up 68 percent. Better targeting of ads due to an increased understanding of user needs was also cited as a reason for bullish ad revenue forecasts.
CIBC World Markets also put a a strong buy rating on Yahoo!, as it started coverage on shares of Internet companies. eBay Inc. (Nasdaq:EBAY), up 5 5/16 to 140 11/16, and America Online Inc. (NYSE:AOL) up 1 3/4 to 95 3/4, received "strong buy" ratings, and Amazon.com Inc. (Nasdaq:AMZN), up 2 1/2 to 63 15/16, a "buy" rating.
Reuters contributed to this report.