Yahoo Stock Falls on Revised Ratings

Wall Street is starting to believe Yahoo Inc. is no longer a bargain.

The Internet company’s stock, which recently surged to a two-year high, dropped 5% Tuesday as some analysts concluded shares are priced about right.

Yahoo closed down $1.23 a share to $22.79 on Nasdaq. The Sunnyvale, Calif.-based company declined to comment.

Salomon Smith Barney’s Lanny Baker revised his rating down to “in line” from “outperform” after Yahoo briefly exceeded his $24 target last week. Baker said Yahoo has a “sustainable multiyear growth trajectory,” but added he doesn’t see a need to raise his forecasts.

Safa Rashtchy of U.S. Bancorp Piper Jaffray also cited the appreciation in Yahoo’s shares in raising questions about Yahoo’s valuation, but said the firm is well positioned for an advertising recovery.

Thomas Weisel’s Gordon Hodge remains bullish on the company despite revising his rating to “market performer” from “buy.”

“There is no ‘hidden message’ here,” Hodge wrote. “We believe that momentum is strong at Yahoo in all business lines.”

Yahoo’s stock has soared since hitting a 52-week low of $8.94 in September. Yahoo has seen a jump in earnings from premium services, fees from advertisers who pay for prime space on its search engine and from other Internet advertising.