Sector Snap: Major Web stocks mostly dip

NEW YORK - Major Internet stocks declined Tuesday, with Yahoo Inc. continuing to fall after it rejected Microsoft Corp.'s latest offer for its Web search operations.

Yahoo shares shed 63 cents, or 2.8 percent, to $21.94 in midday trading, extending Monday's 4.2 percent decline. The Sunnyvale, Calif., company Saturday rejected Microsoft's proposal, saying it's not in the best interests of company shareholders.

In response, activist investor Carl Icahn — who owns 5 percent of Yahoo — plans to replace the Internet company's board, and filed final nominating papers on Monday for a slate of candidates that will oppose its current board of nine in an Aug. 1 shareholder vote.

In a note to clients late Monday, Citi Investment Research analyst Mark Mahaney predicted an offer by Microsoft to buy Yahoo outright "would be more palatable" to Yahoo shareholders.

He also noted that "if Microsoft wants to gain scale in online advertising, there is still no Plan B."

Mahaney rates Yahoo shares "Hold" with a $24 price target.

Shares of Google Inc. fell $1.66 to $519.96.

The online search company is poised to report its second-quarter results on Thursday, and Stifel Nicolaus & Co. analyst George Askew expects that search ad growth "remained strong even as other online advertising formats may have softened during the quarter."

The analyst, who rates the stock "Buy" with a $675 price target, believes that "Google's strategy of eliminating low-quality text ads is supporting growth in revenue-per-click in the quarter."

Meanwhile, shares of online auction company eBay Inc. fell 11 cents to $27.38.

RBC Capital Markets analyst Stephen Ju lowered his price target for the stock to $35 from $40 in a client note Tuesday while keeping his "Sector Perform" rating.

Ju said his data tracking indicates eBay's U.S. gross merchandise value, which refers to the total amount of money that flows from transactions on the company's online trading site, may have risen in the second quarter.

However, he thinks take rates — the average commission rate eBay charges for each item sold — may decline in the coming two to three quarters because of deals with big online retailers that are less favorable economically than those with traditional PowerSellers.

Shares of online retailer Amazon.com Inc. rose $1.19 to $67.47, while shares of IAC/InterActiveCorp rose 8 cents to $17.70.

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