Yahoo! Shares Plunge. How Low Will They Go?

It doesn't look good for web mogul Yahoo! The stocks hit a two year low as investors tire of awaiting new technology. The changes in advertising formulas have been delayed without explanation by "the management".

Forbes.com reports:

Investors quickly showed their dismay Wednesday as Yahoo's shares plummeted 21 percent to as low as $25.38 on the Nasdaq Stock Market. That marked the stock's lowest point since it traded at a split-adjusted $25.34 in May 2004.

A 20% drop in stock price has caused $9.6 billion of shareholder wealth to drop of the map.

According to Wall Street Yahoo! keeps reaping the benefits of increased online advertising spend while continuing to lag behind search engine leader Google. Prospects believe that gap will not close as quickly as promised.

Another blow to Yahoo!:

JP Morgan Securities analyst Imran Khan downgraded Yahoo's stock to "neutral" and expressed doubts whether the company will even be able up to live up to its financial projections for the rest of the year. He also believes Yahoo is destined to fall further behind in its technology race with Google, which will provide an update on its progress Thursday when it is scheduled to release its second-quarter results.

Investors shouldn't worry too much just yet. Or perhaps investors should, employees should not. Yahoo is not a struggling company despite the backlash. It has earned $164.3 million during the quarter which ended in June. However, that is a 78% drop from the reported $754.7 million earnings of second quarter 2005.

Forbes.com notes:

But the sharp decline is deceiving because Yahoo realized a $552 million windfall in last year's quarter by selling its remaining stake in Google. New accounting rules also required Yahoo to deduct the cost of employee stock options from its profit, something it didn't have to do last year.

There's obviously a lot of market play and number crunching going on right now. For the full story click here.

It appears that with the changes in accounting and record keeping the vast losses are actually gains. Some market observers view Yahoo! stock as a bargain.

Yahoo still boasts the Internet's largest audience with 402 million unique users. But it has been losing favor among investors as Google has widened its lead in the lucrative search market.