Ahead of the Bell: Yahoo shares slip after 1Q

Analysts say Yahoo has made progress, but turnaround will take a long time; shares slip

Associated Press

NEW YORK (AP) -- Yahoo is making progress, but the company still has a long way to go to catch up to its competitors, analysts said Wednesday.

The Internet company on Tuesday announced a better-than-expected first-quarter profit. But investors were watching revenue, which shrank 7 percent as Yahoo's display advertising business lost more ground.

Yahoo CEO Marissa Mayer, who was lured away from a top job at Google Inc. nine months ago to revive revenue growth at Yahoo, assured analysts that her plans are falling into place, but cautioned that it will be several more years before Yahoo is growing anywhere near the rate of Google and Facebook.

Yahoo is doing well by hiring and keeping talented employees and developing new products, said Cantor Fitzgerald analyst Youssef Squali. He has a "Buy" rating on Yahoo.

The company has recently bought a string of startups with the aim of bringing in engineers expert at mobile applications and social networking. Under Mayer, Yahoo has also redesigned its home page, email service and Flickr photo-sharing service.

But Yahoo remains far behind competitors in the most important Internet trends for consumers, said Citi analyst Neil Doshi. Those include mobile, social networking, "cloud" computing and local e-commerce. Showing "sustained growth" will take a while, he said. Nevertheless, Doshi raised his price target by $2, to $23.

A team of Jefferies Internet analysts also raised their target price on Yahoo, by $4 to $24, but cautioned that the Sunnyvale, Calif., company's turnaround "could be a time-taking and potentially risky endeavor."

Still, Yahoo has its Asian assets, which analysts noted remain lucrative. Much of company's profit growth in the quarter came from Yahoo's investments. It owns 24 percent of Alibaba Group, a fast-growing Internet company in China.

Yahoo shares fell 43 cents, or 1.8 percent, to $23.36 in premarket trading. The stock has risen 59 percent over the past 12 months.

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