Morgan Stanley analyst Brian Nowak downgraded his rating onYahoo! Inc. shares to"equal-weight" from "overweight," Benzinga reported July 26.

Nowak's ratings action comes a day after struck adeal tobuy Yahoo's operatingbusiness for about $4.83 billion in cash to integrate the assets withAOL Inc., creating anentity with a combined portfolio of more than 25 brands. The deal, which isexpected to close in the first quarter of 2017, does not include the MarissaMayer-led company's cash, the company's Alibaba Group Holding Ltd. holdings, Yahoo Japan shares,Yahoo's convertible notes, certain minority investments and Yahoo's noncorepatents.

Nowak, who reduced his price target on Yahoo stock to $42 from$46, said that while the risk/reward is balanced for now, the new Yahoo HoldCowould need to sell its stake in Alibaba in a tax efficient manner foradditional upside. The analyst thinks the next step for Yahoo should be to tryto close its Alibaba liquidity discount by selling Yahoo Japan.