Now that Microsoft has left Yahoo twisting in the wind, investors want to know whether to put money into the beleagured Web giant's shares — and the shares of its rival Google.

One Wall Street analyst is urging investors to buy both.

In a research note issued today, UBS internet analyst Ben Schachter reiterated his buy rating for both companies, but for different reasons.

"For Google, we believe the momentum of its current business, continued management execution, and investor sentiment surrounding the potential of its future opportunities will enable shares to approach the highs reached back in fourth quarter 2007," Schachter wrote. He raised his 12-month price target on Google to $750 from $570. Google shares were trading at $581.91 Thursday afternoon.

As for Yahoo, Schacter refuses to rule out the possibility that Microsoft could return with a new offer for the company, especially if Jerry Yang and his team are unable to boost the company's performance and share price.

"For Yahoo, investors still holding out for the possibility of a Microsoft acquisition (which we believe is an option) will keep the stock in play, and if the acquisition is 'not to be' as Mr. Ballmer so eloquently stated, then we still think Yahoo's stock can work," Schachter wrote.

"While we disagreed with Yahoo's decision to reject Microsoft's bid," the analyst wrote, "we now expect Yahoo to focus on proving to its shareholders and other constituents that it made the right decision by focusing on its strategy and at least partially outsourcing search to Google and other competitors in the near-term."

Schachter lowered his 12-month price target to $30 from $34, which is still above the stock's current level, $26.09 in trading Thursday afternoon.

But a search ad deal with Google looks less likely today, after the Wall Street Journal reported that Google executives are now divided over whether to pursue such a deal.

Meanwhile, Microsoft has released its slate of rival directors from their commitment to stand for election to replace the current Yahoo board, Reuters reported.

by Sam Gustin