Weekend Edition: Morningstar's Love Affair With Yahoo! (YHOO)(GOOG)(MSFT)

Although mutual fund and stock research firm Morningstar does not use traditional "buy" ratings, it new write-up on Yahoo! is as close as they will ever come. They rate the internet gian five stars, their highest ranking. And, the targer for entering that stock is $28.50, just above the the current price of $28.14. Their exit price is $46.40. The stock has not traded there since 2001.

Morningstar like the mix of internet advertising and pay-for-services programs like personal ads. The research firm also believes that Yahoo! will be able to start changing for video content. But, this market gets more crowded by the day. AT&T announced its online TV initiative today.

The report's case it not very compelling. It admits that companies like AOL, Google, and MSN could take share from Yahoo! and that this poses the greatest risk to the company's growth. Given the resource the three companies have, the risk is not insignificant. And, the sales of premium services get more competitive by the day.

The chance that Yahoo! will get back to $46 seems very slim. Google and other web companies would have to make major strategic errors for Yahoo! to gain much share in the search market, where it is in second place. And, AOL and MSN along with smaller sites like You Tube and Monster.com already offer a range of services that will be difficult for Yahoo! to compete with.

Mayby Morningstar should go back to the drawing board and give Yahoo! three stars.