Yahoo's price target was snipped to US$21 a share from US$24 on Monday by a Wall Street analyst, following the Internet search pioneer's confirmation that it is delaying its controversial search-advertising deal with Google.
Sanford Bernstein analyst Jeffrey Lindsay noted in a research note that despite reports that Yahoo is in talks with Time Warner, the probability of a deal between the media conglomerate's struggling AOL unit and Yahoo remains relatively low, in part due to antitrust regulators' concerns about the proposed Yahoo-Google deal.
In his research noted, Lindsay stated:
"Regulators might not allow the AOL-GOOG paid-search deal to pass to YHOO, which would wipe out the other synergies--creating a large risk for both sides. We are reducing our YHOO price target to US$21 but maintain TWX (Time Warner) at US$18.50."
In addition, Lindsay points out that stock transactions over US$3.4 billion are dilutive to Yahoo's shareholders and that Time Warner was likely hoping to receive US$6 billion to US$8 billion for AOL, which is possible only if Yahoo can gain some synergies from the transaction.
A third point Lindsay raises:
"The primary source of synergies is staff reductions, where YHOO has [an] unimpressive track record. Other benefits, such as pricing power in display, and combining Advertising.com with Right Media Exchange, will not drive short-term incremental revenues."
Yahoo's stock on Friday closed at US$16 a share, slightly up from US$15.58 a share the day before.
This article was first published as a blog on CNET News.com.
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