AmTech Cuts Price Target on Google (GOOG) to $480
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American Technology Research cut estimates and lowered its price target on Google (Nasdaq: GOOG) from $725 to $480. The firm maintains a Buy rating.
The firm said its estimate cuts on Google are attributable to "a meaningful appreciation of the US dollar and concerns of the spread of economic slow-down into continental Europe." Interestingly, AmTech said that if "the NASDAQ were not on three-year lows, we would be stepping to the sidelines in front of estimate cuts." Although confidence in Google has recently fallen, AmTech is anticipating a bounce in shares, but notes that if the stock bounced to the "mid-$400's on bailout or otherwise, we would likely reconsider our rating."
AmTech estimates that if the dollar doesn't appreciate further, currency would impact Google's sales by about $110 million in Q3 and by about $260 million in Q4. Taking these rates forward, AmTech's model suggests that Google will see a reduction of about $1.3 billion in sales due to exchange rates. Moreover, AmTech is predicting that a 5% gain in the dollar will be dilute to Google's quarterly EPS by about $0.31, implying a reduction in next year's EPS by about $1.52.
The AmTech report also mentions a currency hedge Google previously initiated on 18-month forward contracts, and the firm estimates that it could create a $285 million gain and a boost to EPS of $0.76. The hedge will not offset the full impact of currency if the dollar continues to appreciate, however, and AmTech says that it wouldn't be surprised to see Google implement new hedges.
With shares of Google trading about 4% higher to $407 today, AmTech's lowered price target represents potential upside of about 18% from current levels.
Google, Inc., a technology company, maintains index of Web sites and other online content for users, advertisers, Google network members, and other content providers.
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