Lust, caution for Google, Yahoo

Street has different expectations about Web giants

Internet earnings season shifts into high gear this week, with Yahoo on the agenda today followed two days later by Google. Most analysts are optimistic about the latter and cautious on the former as they look for signs of its ability to catch up with Google's online advertising strength.

Deutsche Bank analyst Jeetil Patel, for example, predicts Yahoo results will be either in line with expectations or slightly below and in a Monday research note maintained his $24 target on shares, or 14% lower than their $27.86 closing price Monday.

Likewise, Cantor Fitzgerald analyst Derek Brown doesn't expect anything thrilling from Yahoo's earnings report, set for after today's closing bell. On Friday he reiterated his $30 target, suggesting the stock will rise less than 8% during the next 12 months or so.

Yahoo shares are up 9% so far this year, and the company has been through some significant changes, chief among them being the departure of CEO Terry Semel, who was replaced in June by co-founder Jerry Yang.

The company also released its long-awaited Panama advertising platform that it is counting on in its battle against Google for search-advertising dollars. Brown, though, said that Panama "has not proven a game changer" so far.

One of Yahoo's bullish commentaries comes from RBC Capital Markets analyst Jordan Rohan, who on Monday reiterated his "outperform" ranking on Yahoo and $34 target, which, if met, would mean a 22% jump in about 12 months.

Rohan said that his data indicates Yahoo has been a bit more successful than Google in getting advertisers to spend more money on search ads quarter-over-quarter.

Last week, Goldman Sachs analyst Anthony Noto wrote in a report that Google and eBay were his top big-cap picks in the Internet industry, a sector that's up 45% year-to-date and one that he is still quite bullish on.

"We continue to view the Internet sector as our favorite sector across communications, media and entertainment given the benefits of strong secular growth trends and significant international exposure, both of which offset a U.S. slowdown," Noto said.

Meanwhile, Noto's $620 year-end target for Google already has been breached, even with the stock closing down 2.7% on Monday at $620.11.

After Google's recent strong run, "upside may be modest on the reported results," Rohan said. But longer-term, "we find few companies as well positioned as Google."

On the Google call, one key issue that investors will look for updates on is the continuing transformation of YouTube, which has been trying its hand at banner and controversial overlay ads.