Yahoo! (YHOO) is looking more and more like the best internet stock for shorting. The stock trades at $25.70 now.
This week Barron’s quoted an internet analyst from Bernstein as saying that the company’s share of the search market has dropped below 18% in the US and worldwide below 13%. Bernstein believes that Yahoo! needs to cut one-fifth of its staff to get costs in line with next year’s revenue, but new management appears to have no stomach for this. That means that margins could drop further.
In mid-November, the short interest in Yahoo! was over 54 million shares making it sixth among total short interest for companies listed on the Nasdaq. Wall St. has growing concerns that internet
advertising growth will be hurt by the economic slowdown. Yahoo!’s revenue grow is already
slower that the 25% or so year-over-year improvement in the internet advertising revenue pool.
Yahoo! shares were below $23 in August.
It would take very little in the way of bad news to push them back below that level.
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