Analyst Upgrades

• DuPont (DD) was upgraded to buy from neutral at Goldman.
• UBS upgraded Deere (DE) to buy from neutral and AGCO (AGCO) to neutral from sell.
• Canadian Solar (CSIQ) was upgraded to outperform from neutral at Macquarie.
• Thoratec (THOR) and DTE Energy (DTE) were upgraded to overweight from equal weight at Barclays.
• NICE Systems (NICE) was upgraded to overweight from neutral at HSBC.
• Deutsche Bank upgraded Copa Holdings (CPA) to buy from hold.
• BofA/Merrill upgraded Nu Skin (NUS) to buy from neutral.
• Continental Resources (CLR) was upgraded to buy from hold at Jefferies.

Analyst upgrades:

• Goldman upgraded General Electric (NYSE: GE) to Buy from Neutral and raised its target to $15 from $13 citing reports that U.S. House Financial Services Chairman Barney Frank has indicated regulatory reform will not require a separation of GE Capital.
• Syntel (NASDAQ: SYNT) was upgraded to Market Perform from Underperform by Wells Fargo. The firm upgraded the stock following the company's much better than expected Q2 EPS.
• Canaccord upgraded USANA (NASDAQ: USNA) to Outperform from Market Perform citing the strong Q2 report and earnings momentum. The firm has a $40 target on the stock.
• Royal Caribbean (NYSE: RCL) was upgraded to Equal Weight from Underweight at Barclays.
• Equity Residential (NYSE: EQR) was upgraded to Market Perform from Underperform at FBR Capital.
• Tyco Electronics (NYSE: TEL) was upgraded to Buy from Neutral at UBS.
• Yum! Brands (NYSE: YUM) was upgraded to Overweight from Equal Weight at Morgan Stanley.

"As steel prices continue to climb, one company that is set to profit handsomely is Cleveland-Cliffs (NYSE: CLF)," says Bill Martin.

Adding to the stock's appeal, the editor of BullMarket.com explains, "Event-driven hedge fund Harbinger Capital has been an aggressive buyer of the stock." Here's his review of the situation.

"Shares of Cleveland-Cliffs have been on fire, up over 150% year over year and they have more than doubled year to date. The Cleveland, Ohio-based company is the largest producer of iron ore pellets in North America and a major supplier of metallurgical coal to the global steel-making industry.

"Cleveland-Cliffs benchmarks iron ore prices to the price of steel, so when steel prices rise, so do iron ore prices. The company said all of its North American iron ore mines are producing at or near capacity.

"Cleveland-Cliffs ended the first quarter of 2008 with $186.5 million of cash and cash equivalents and $600 million in borrowings outstanding under an $800 million credit facility. The company expects to generate approximately $700 million in cash from operations in FY08 as it sells through its inventory.

"Event-driven hedge fund Harbinger Capital was an aggressive buyer of the stock in May, paying between $76.96 to $104.75 a share to add to its position in the name. For the month, the firm spent approximately $338.5 million to acquire nearly 3.7 million shares.

I was doing some research work and surfing on the great tech blog, TechCrunch, when an article caught my eye. (Actually, I use techmeme to search for important tech stories and came across the aforementioned article -- but, that's not important right now.)

The article was about a $20 million infusion by the Carlyle Group and H.I.G. Ventures in a Southern California-based company named REVShare. Your friend and mine, Google (NASDAQ: GOOG), has made a push into Cost-Per-Action (CPA) advertising. CPA advertising is the holy grail for advertisers, because the advertiser only pays when an action he defines (like purchasing a product) occurs. This has long been a mainstay of internet advertising, as it's relatively easy to gauge such metrics. Commission Junction, part of ValueClick, (NASDAQ: VCLK) has been making a living at this for a long time (in relative web years). Television, on the other hand, has always been a slippery bugger.

MOST NOTEWORTHY: Cisco Systems (CSCO), Finisar Corp (FNSR), Tenet Healthcare (THC), Best Buy (BBY) and Cascade Corp (CAE) were today's noteworthy upgrades:

• Bear Stearns upgraded shares of Cisco Systems (NASDAQ: CSCO) to Outperform from Peer Perform, with a $36 target, after the quarterly results as they believe revenue growth is sustainable and diversified. Bear expects Cisco to benefit from significant new product cycles over the next two years and believes investments in emerging markets are beginning to pay off.
  

• Merriman upgraded Finisar (NASDAQ: FNSR) to Buy from Neutral to reflect the improved outlook at their top customer, Cisco.

• Tenet Healthcare (NYSE: THC) was upgraded to Hold from Sell at Stifel, as the firm expects shares to remain range bound.

• Pali Capital raised shares of Best Buy (NYSE: BBY) to Buy from Neutral with a $55 target on valuation as they believe the bad news is already priced in.

• Cascade (NYSE: CAE) was upgraded to Market Perform from Underperform at Rodman & Renshaw on valuation.

OTHER UPGRADES:

• Warner Music (NYSE: WMG) was upgraded to Buy from Sell with a $13 target at Citigroup.

• Citigroup also upgraded shares of Copa Holdings (NYSE: CPA) to Buy from Hold with a $71 target.

• Baird upgraded shares of Parkway Properties (NYSE: PKY) to Outperform from Neutral on valuation.

• Computer Sciences (NYSE: CSC) was raised to Hold from Underperform at Jefferies on valuation and improvement in bookings.

• Morgan Stanley upgraded ABB Ltd (NYSE: ABB) to Overweight from Equal Weight.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: The educational services industry, the Latin American airlines sector, Asta Funding Inc (NASDAQ: ASFI) and Chipotle Mexican Grill Inc (NYSE: CMG) were today's noteworthy initiations:

• William Blair assumed coverage of Apollo Group Inc (NASDAQ: APOL) and Strayer Education Inc (NASDAQ: STRA) with Outperform ratings and Career Education Corporation (NASDAQ: CECO) with a Market Perform rating. The broker also assumed coverage and downgraded DeVry Inc (NYSE: DV) to Market Perform from Outperform.
  
• Goldman Sachs initiated coverage on Copa Holdings (NYSE: CPA) with a Buy rating and $88 target, GOL Linhas Aereas Inteligentes SA (NYSE: GOL) and TAM SA (NYSE: TAM) with Neutral ratings and Lan Airlines SA (NYSE: LFL) with a Sell rating and $93 target; Lan Airlines was also initiated at Morgan Stanley with an Overweight rating and $105 target.
  
• Asta Funding was initiated at Kaufman Brothers with a Buy rating and $55 target. The firm believes the company should grow earnings at a midpoint of 20% over time, with near-term growth at 15% and longer-term growth at 20%-25%.
  
• Citigroup initiated shares of Chipotle Mexican Grill with a Buy rating and $100 target, as the firm expects the company will see unit growth at a rate in the high-teens while experiencing above-average SSS and some margin expansion.

OTHER INITIATIONS:

• BMO Capital initiated shares of CDC Corp (NASDAQ: CHINA) with a Market Perform rating and $11 target.
  
• Jazz Technologies Inc (NYSE: JAZ) was initiated with a Buy rating and $5 target at Wedbush Morgan Securities.
  
• Calyon Securities initiated shares of Pinnacle Entertainment Inc (NYSE: PNK) with an Add rating and $32 target.
• Luminex Corporation (NASDAQ: LMNX) was initiated with a Buy rating at Pacific Growth Equities.

As I've said before, Google Inc.'s (NASDAQ: GOOG) goal of world domination centers around the company's capability to be the center of advertising in as many channels as possible where it can take a small cut from connecting global buyers and sellers of all sizes and wallets. With that said, Google's moves in recent years that sprout from its roots as a web-only advertising conduit to a radio and even TV advertising conduit will only grow to ensure Google stays atop the changing media landscape of meaningful advertising as the 30-second TV spot dies a slow death.

Google, on that note, has launched a CPA advertising model for U.S. advertising customers. In this model, there is an associate cost for the advertised based on every action or acquisition (transaction) between the seller and buyer. The "buyer" does not have to buy anything at all in many cases, but just perform the needed action required by the seller (such as an e-newsletter signup).

This is quite an addition to Google's pay-per-click advertising model if you ask me, and it firmly plants Google in the age of traditional advertising where advertisers and marketers pay for a successful "interaction" between themselves and a customer or potential customer. In the CPM model (cost per thousand), the advertising cost is based on "impressions" with little or no measurement on customer interest beyond electronic tracking using web bugs and associated engagement tools for advertisers. Google's move into the CPA arena will most likely make advertisers work a little harder to gain that customer, but they'll be rewarded as that customer completes an interaction with the advertiser -- making Google's advertising model even more relevant to the consumer hopefully.

The lawsuit by Kinderstart against Google, while an interesting issue, is small potatoes compared to what many consider to be the real elephant in the room: click fraud.  Both Yahoo and Google have already run into legal trouble -- resulting in relatively small monetary settlements -- regarding such allegations.  Today the San Francisco Chronicle discusses a new report by Burlingame market researcher Outsell Inc. suggesting that click fraud cost merchants $800 million last year and is a signficant enough threat that 27% of merchants are cutting back on click-based advertising.

Coincidentally, over on ZDnet, Digital Micro-markets blogger Donna Bogatin has recently been discussing both Microsoft's and Yahoo's assessments of and attempts to thwart click fraud, concluding that click fraud prevention could be the next great search engine differentiator.  She also suggests that Google has lagged behind its competitors in facing this issue publically. 

Now this is hardly a new problem. It has been around long enough to have spawned a whole set of start-ups aimed at prevention.  But the fact that it won't go away -- and if the Outsell report is accurate, may actually be getting worse, at least from the merchants' perspective (and who else counts?) -- may suggest that cost-per-click needs an upgrade.  The next step, of course, is the cost-per-action model that some analysts and customers are pressing for.  Some sites already offer this and Google is reportedly experimenting with it as well. 

But CPA is a very slippery slope.  The issue goes back to why online publishers traditionally resist cost-per-click pricing for display advertising: your revenue becomes dependent on the advertiser's creative.  A good ad is going to get more clicks than a poorly executed one.  CPA action takes that dependency a step further: the search engine's revenue depends on both a well-designed pitch after the click plus an enticing offer.  If the advertiser fails on either of those points, you're not going to get paid and your inventory isn't generating revenue.

If I ran a search engine, I'd be spending a lot of time and energy trying to maintain the credibility of my cost-per-click business. If the market really does turn to cost-per-action, we may end up looking back on these as the Golden Days of search engine advertising, when the money just fell from the sky. 

 

Okay, so it wasn't a good day.  Not for the markets, and definitely not for Yahoo, Inc.

There wasn't much news from Yahoo today, but there were some overall concerns.

The first was competition. Competition is fierce in the Internet business with the big guns attacking the market from each angle possible. Just today Google, announced a toolbar partnership with Adobe where the latter would offer Google toolbar with its software, something Yahoo had done a couple of years ago already.

But today's competition concerns didn't come from within the industry, it came from Newspapers that claim to gain ground, especially in the local market.  In fact, readership of newspapers has been "growing enough that their online ad rates are approaching their print rates."

The second concern was click fraud, meaning those who click on their own ads or set programs to do so.  While Google just launched a CPA (Cost per Action) advertising that might be able to combat click fraud, Yahoo is still new to the game of affiliate marketing and isn't as well poised to handle fraudulent clicks.

On the flip side, Yahoo is still considered cheap within its industry and a buy.

Yahoo is a late entrant to the user-generated video service despite running its video service since 2004.  Will Yahoo be able to break into the market?  For now the service is comprehensive, meaning user-submission videos as well as Yahoo's own video property, which makes it into a large library.  This could make a difference.

Yahoo shares lost 38 cents (1.22%) today to close at $30.68.