Dueling Fools: Yahoo! Bear

I'm collecting signatures. Hope you don't mind signing up. I'm just trying to petition Yahoo! (NASDAQ:YHOO) to swap the exclamation point at the end of its moniker for a question mark.

Let me state my reasons. See whether you agree.

I'll start by announcing that I do, in fact, use Yahoo (no, no exclamation mark). I rely on many of the company's services, like search, e-mail, and financial research. However, in all honesty, I can't proclaim any of Yahoo!'s features as a primary source. My main email account is at Time Warner's (NYSE:TWX) AOL, and I am finding myself directing more of my free e-mail traffic over to Google Gmail than Yahoo! Mail. Lately I have performed far more searches on Google (NASDAQ:GOOG), and even Microsoft's (NASDAQ:MSFT) MSN.com, than at Yahoo.com.

I haven't had a reason to go back to Yahoo! Maps since Google Maps was launched. I won't even get into how I have 166 positive feedback ratings on eBay (NASDAQ:EBAY), yet I have never sealed a deal on Yahoo! Auctions. As a website publisher, I have had beta accounts with both Google AdSense and Yahoo! Publisher Network, and every single time I test out the YPN product, the targeting is off and the payout rates are pitiful compared with Google's more established program.

Maybe if I weren't married -- or faithful -- I would turn to Yahoo! Personals over IAC/InterActiveCorp's (NASDAQ:IACI) Match.com, or eHarmony. I can't vouch for Yahoo! here beyond conceding that it's the top dog in terms of traffic in online dating.

I am not pompous enough to judge everyone by my own cybersurfing habits. It's just that, for me, save for the broad scope of Yahoo! Finance, the company is a jack of all dot-com trades but a master of none. It's where I find myself hibernating with this thick bear fur.

Maybe you're not me
You might see Yahoo! completely differently. If so, let's turn to an unlikely source for proof that Yahoo! is as overvalued as it is angling towards irrelevance. Got Google? You probably have an opinion on the online world's most valuable company. If you think that Google shares are fairly priced or a bit overpriced, man, oh man, are you going to hate Yahoo!.

Let's stand Yahoo! and Google up side-by-side to see how their P/E valuations stack up over the next two years.

Yes, Yahoo! is more expensive than Google on an earnings basis. What does Yahoo! have going for it that makes it worthy of a richer multiple than a stock that many feel is already stretching its valuation?

It's not the portfolio of properties. It's not even the top- or the bottom-line growth.

Slower growth? Fatter markup? It's more than that. If you check those margins, the assumption is that Yahoo! will grow its earnings at a faster clip than its top line next year. The opposite holds true for Google. Does that seem odd to you? How is Yahoo! supposed to widen its margins next year in a period in which Wall Street's model-makers think Google's margins will shrink? Even if Google isn't up your alley, it may actually make sense to buy Google and short Yahoo! and lock in the valuation disparity.

It also can't help that profit forecasts are lower at Yahoo! than they were three months ago. It's the other way around for Google.

More than just Google
Buying into Yahoo! at these prices assumes some pretty heady growth expectations. And that's not likely to happen organically. According to comScore Media Matrix, Yahoo!'s search engine market share has shrunk from 31.1% to 27.6% over the past year. This has happened as others like Google and Ask.com have carved out thicker slices. All of this is happening just as MSN will be taking its search business more seriously as it puts the finishing touches on its Overture killer.

So how much will Yahoo! spend to get back in the game? It has already skirted past the material deals. It let eBay swallow Skype, even though it would have cemented Yahoo!'s role in the IM space. It let Google snap up Blogger and let News Corp. (NYSE:NWS) take MySpace, all the while snagging smaller blogging and social networking sites like Del.icio.us and Upcoming.org.

The commitment to compete is there, but not the commitment to win. At a lower price -- and I'm talking about a significantly lower price -- I can probably be talked into trading my bearskin for bullhorns. But certainly not at these lofty levels.

Yes, Yahoo! deserves to have Yahoo? as its official moniker. Here's why:

• How will Yahoo! justify its expensive earnings-based valuations?
• How much more virtual real estate will Yahoo! surrender to more ambitiously acquisitive rivals?
• Where is this company going to expand its margins when even Google has conceded that a more competitive environment will test margins?

I do Yahoo! but I would never due Yahoo!.

Time Warner and eBay are active recommendations in theMotley Fool Stock Advisornewsletter service. Microsoft was recently singled out forInside Valuesubscribers.

Think you're done with the Duel? You're not! Go back and read the other three arguments, and then vote for a winner.

Longtime Fool contributor Rick Munarriz is a frequent Yahoo! visitor, but he does not own shares in any of the companies mentioned in this story.The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.