Shares of Yahoo sink after analyst downgrade

Yahoo falls as analyst downgrades, predicting online shopping, ad spending will drop in 1Q

• On 6:58 pm EST, Monday January 12, 2009

SEATTLE (AP) -- Shares of Web search provider Yahoo Inc. fell Monday after an analyst predicted spending on online advertising will sink more than usual in the typically slow first quarter.

Yahoo stock closed down 91 cents, or 6.9 percent, to $12.22. The stock has ranged between $8.94 and $30.25 over the past year.

American Technology Research analyst Rob Sanderson wrote in a note to investors that he expects a significant slowdown in online shopping.

Sanderson also wrote that he expects "the online advertising market to take a much greater than seasonal decline" in the first three months of 2009. The post-holiday first quarter is traditionally slower for online ad spending.

However, Sanderson noted that the possibility of a sale to Microsoft Corp. or another sort of deal could keep Yahoo's stock from falling too far.

"We continue to believe this is the ultimate outcome and will reward Yahoo shareholders, but have no visibility on timing," Sanderson wrote.

The analyst downgraded shares of Sunnyvale, Calif.-based Yahoo to "Neutral" from "Buy" and cut his price target to $14.50 from $18.