Fearing a slowdown in online advertising, an analyst downgraded the stocks of search giants Google and Yahoo on Thursday.
Shares of both companies fell roughly 5 percent each in late morning trading, pushing Yahoo to $30.49 a share and Google to $185.25. The broader markets, however, were up during morning trading.
"We had hoped that momentum in paid search from the fourth quarter would carry through to first-quarter results," Jordan Rohan, an analyst with RBC Capital Markets, said in his research note on Yahoo. "But now we believe otherwise."
Rohan, citing checks with the companies' channels for selling online ads, downgraded Yahoo to the equivalent of a "hold" from a "buy." And he downgraded Google to the equivalent of a "hold" from a "strong buy."
In the case of Google, Rohan projected the company would increase its first-quarter revenue 5 percent from the previous quarter, rather than the 13 percent jump he previously forecast. Wall Street expects the company to generate a 13 percent increase.
Earlier in the week, David Garrity, an analyst with Caris & Co., downgraded Google to a "buy" from a "strong buy," according to Thomson Financial. Garrity had also cited similar concerns in his research note.
"We view Google as likely to remain the paid search advertising leader and stand by our financial projections," Garrity said in his research note. "That said, however, we see few near-term catalysts likely to drive valuations higher."
Garrity pointed to preliminary fourth-quarter industry figures released on Tuesday by the Interactive Advertising Bureau, which cited revenue figures from online ads that were below his industry projections for the three-month period.
The bureau estimated fourth-quarter revenue of $2.7 billion, while Garrity had expected the industry to generate $3.34 billion in revenue for the quarter.
That said, a number of industry analysts recently upgraded Yahoo and Google after the companies reported their fourth-quarter results. Yahoo posted stronger-than-expected earnings for the quarter, as did Google.
According to Thomson Financial, three analysts have upgraded Google since it reported its fourth-quarter results Feb. 1, compared with the two downgrades. Yahoo received four upgrades and one downgrade after it reported fourth-quarter results in mid-January.
Join the conversation
Comment replyThe posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.
Chamtech's spray-on antenna uses a nano material to provide a low-power boost to antenna range. The wireless-in-a-can product may some day bring an end to unsightly cell towers.
Whether Apple will release a new iPad next month doesn't seem to be the question as much as what day it will happen. A new rumor has it down to the day.
Tommy Jordan, the man who shot his daughter's laptop for YouTube, gets a visit from police and child protection services. Oh, and Good Morning America.
EnerG2 opens a plant to make an engineered carbon that will improve performance of energy storage devices and make storage for start-stop hybrid cars less expensive.
As UC Berkeley students, the co-founders of "Back to the Roots" discovered they could grow mushrooms using recycled coffee grounds. Now their mushroom kit sells at grocery stores across the country.
Join the conversation