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Why Tigress Financial Downgraded Yahoo

Yahoo! Inc. (NASDAQ: YHOO)'s core business continues to deteriorate, while its sales have flat-lined and margins narrow, an analyst said Friday.

Tigress' Ivan Feinseth downgraded Yahoo to Neutral, from Buy, and said he sees little sign of a quick turnaround.

The company missed earnings expectations by nearly 17 percent April 21, while revenue increased 8 percent.

Yahoo shares are off more than 4 percent this week but closed Friday little changed at $42.51.

Related Link: These 10 Stocks Could Move Big On Monday

Yahoo's revenue in the recent quarter from the combined categories of mobile, video, social and native grew 58 percent, but represented just 30 percent of revenue.

While Feinseth believes those revenue categories will eventually become more significant, "we've tempered our expectations," he added.

Yahoo's revenue from its core business in the first quarter declined 4 percent in the recent period. During the past 12 months, total revenue has grown by less than 1 percent.

Cash flow has fallen more than 7 percent in the past year, to $2.9 billion, while Yahoo's operating margins have narrowed significantly, Feinseth said.

Analysts on average maintain an Overweight rating on Yahoo with a $54.88 target, according to FactSet.

Latest Ratings for YHOO

May 2015

Tigress Financial

Downgrades

Buy

Neutral

Mar 2015

Morgan Stanley

Initiates Coverage on

Overweight

Mar 2015

Axiom

Initiates Coverage on

Buy

View More Analyst Ratings for YHOO
View the Latest Analyst Ratings

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