Ready, Tech, Slow

In a move that is long overdue, UBS Securities analyst Ben Schachter is slashing his price targets on some of the Internet's most venerable names.

With the weak-kneed economy forcing companies to scale back on their online marketing budgets, the Internet's largest lead generators aren't looking as attractive as they used to in their prime.

	New Target	Old Target
Google (Nasdaq: GOOG  )	$525	$700
Yahoo! (Nasdaq: YHOO  )	$20	$28
eBay (Nasdaq: EBAY  )	$18	$28
ValueClick (Nasdaq: VCLK  )	$8	$13

The slashed targets seem severe, until you realize how far the stocks have fallen. Google and Yahoo! are trading for less than half of Schachter's original targets. It's just unrealistic to have expected the stocks to more than double over the next 12 months. ValueClick and eBay are also a bad trading day or two away from fetching half of their earlier markers.

This isn't a price check. It's a reality check. The new prices are attainable. In fact, ValueClick isn't trading too far away from the new $8 finish line.

Want an interesting observation? Yahoo! and eBay were once tagged with similar $28 targets. Scachter's new goal for Yahoo! is higher, even though eBay is the one trading higher today. Is that an endorsement for online advertising over e-commerce? Not really. It's more indicative of eBay's struggles as a platform. Yahoo!, ValueClick, and Google should have no problem bouncing back when Web advertising explodes again.

It will. Generating leads online is a no-brainer. Results can be instantly tracked and measured. It's all about setting the appropriate ad prices. This bodes well for the sector, including the small fries like LookSmart (Nasdaq: LOOK  ) , Local.com (Nasdaq: LOCM  ) , and MIVA (Nasdaq: MIVA  ) that have taken cruel hits. All three companies are now trading below the $3 mark that is typical of penny stocks.

So, do follow Schachter in resetting your expectations lower. Times have changed. When even a behemoth like Google misses earnings expectations in two of the past three quarters, it's safe to say that the fundamentals have also deteriorated. Just don't reset those expectations too much lower.

Online advertising still works. The market dynamics just need to give the niche some time to exhale.

Other ways to ride out the volatility:

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• Our Supercomputer Loves These Stocks.