Justin Post of Bank of America re-positioned media company ratings for 2015. The analyst downgraded shares of Google Inc GOOG GOOGL to Neutral from Buy, while upgrading shares of Yahoo! Inc YHOO to Buy from Neutral.
"On a high level, our rating change provides more exposure to China eCommerce where Alibaba is a market share leader (Yahoo's stock is driven by Alibaba), and less exposure to the U.S. and Europe economy, where Google is an advertising leader," Post wrote in a note.
Post downgraded shares of Google due to a lack of product catalysts, margin pressure to investments in businesses like cloud computer and retail delivery, increased regulatory risk, especially in the European Union. The analyst also notes Google faces heavy competition from Facebook in ad networks and from Apple's product cycle.
Post lowered his price target on Google to $580 from a previous $600.
On the other hand, Post upgraded Yahoo given the company's direct exposure to Alibaba and the potential for a tax efficient sale of the Chinese e-commerce giant.
“Yahoo's CFO recently indicated that there is no change to the company's stance on being optimistic on finding a promising tax solution and that Yahoo would communicate its plans by the next earnings call at the latest,” Post wrote in the same note.
Post adds that his optimism on Yahoo stems from Bank of America's $132 price target on Alibaba shares, as well as an improving core business outlook following Yahoo's acquisition of Bright Roll and search deal with Mozilla.
Post raised his price target on Yahoo to $62 from a previous $55.
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