Legg Mason downgraded Yahoo (YHOO) to hold from buy, explaining that the company's shares have grown more than 25% more expensive since early October.
Analyst Scott Devitt says Yahoo's stock price is now within 1% of his $42.50 target. He notes that at current valuations, he continues to favor Yahoo over Google (GOOG), and he believes Yahoo's strategy will prevail in the long term. He notes that unlike Google, Yahoo's long-term protective moat is insulated from technological change; also, Yahoo has a seasoned management. Still, he notes that it's short-term noise that creates entry and exit points for astute long-term investors. Generally speaking, he finds the Internet sector at current levels fairly to fully valued.