Wall Street Weighs In On Google (GOOG) After Better-Than-Expected Q2 Results
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Wall Street is weighing in on Google (Nasdaq: GOOG) following the search giant's better-than-expected Q2 results after the close. While shares of GOOG are down 3%, analysts are clearly positive on the results and said management's tone on the conference was more positive.
Google reported quarterly non-GAAP EPS of $5.36, up 15.8% from the $4.63 reported in Q208 and also better than the $5.09 analysts had been looking for. Sales for Q2 came in at $4.07 billion, ex-TAC (traffic acquisition costs), in-line with the Street's revenue estimate.
Here are what some key analysts are saying about the results:
POSITIVE VIEWS:
Goldman Sachs: Google's 2Q results, in which price per click (PPC) was up around 3% qoq after falling sequentially the prior three quarters, appear to remove this "vicious spiral" risk. We believe that investors should own Google stock at 17X 2010E EPS for that recovery, and for a sustainable mid-teens yoy revenue / earnings growth rate over 2010-2013. Maintains Buy rating, price target raised to $510 from $486.
Deutsche Bank: While Google delivered in-line/better 2Q results (on lower tax rate), we think the story is becoming more of cyclical growth play (over secular ), as ad budgets increasingly represent the growth constraint (not traffic anymore). The next legs of growth appear to be display ads (2010/2011) & enterprise/OEM licensing/royalties (2011 & beyond), yet paid search should power 17% operating profit dollar growth in 2009. Maintains Buy rating, price target raised to $475 from $425.
Broadpoint.Amtech: "while Google does not provide official guidance, the tone was clearly positive as it definitively noted signs of stabilization in key global markets." Reiterates Buy, price target raised to $520 from $480.
Piper Jaffray: The bottom line is that Google's in-line Q2 and commentary suggest search has stabilized and looks favorable in the back half of 2009. Management's tone has changed since Q1: Eric Schmidt suggested business has "stabilized" in Q2, while we were still in "uncharted territory" in Q1. Google reported revenue slightly above Q1, which was contrary to the seasonality trend management featured on last quarter's conference call (typically Q2 shows less sequential growth than Q1 which was down nearly 4% Q/Q). Additionally, management commented that business has appeared to stabilize. We note that CPC rates were better than expected at up 5% Q/Q, which would seem to suggest that Google ads are converting better than in Q1 and that the consumer is perhaps slightly stronger than expected. Maintains Overweight, price target raised to $494 from $471.
Collins Stewart: Where does GOOG go from here? Though we remain somewhat concerned about the competitive landscape and issues such as higher adoption of SEO, advertisers can deliver some evidences to CSE/Affiliate and social media, in our view, Google remains largely a play on ecn recovery. With signs of stabilization in online ad spend, GOOG is positioned nicely to experience growth acceleration during 2H-09 with arguably flexible cost structure. Maintains Buy, price target raised to $500 from $435.
NEUTRAL VIEWS:
Benchmark: the EPS upside came from a low tax rate. In addition, google.com had slightly disappointing revenue. Furthermore, we expect 3Q09 revenue to be modestly down year-over-year. Maintains Hold.
Soleil Securities: EPS helped by a lower tax rate and strong cost control. Net revenue deceleration continued... GOOG appears expensive if advertising weakness elongates... We believe it is still too early to buy the shares and note that other ad-driven stocks under our coverage have corrected 10-20% over the past 6 weeks while GOOG has not. Maintains Hold, $400 tgt.
Google reported quarterly non-GAAP EPS of $5.36, up 15.8% from the $4.63 reported in Q208 and also better than the $5.09 analysts had been looking for. Sales for Q2 came in at $4.07 billion, ex-TAC (traffic acquisition costs), in-line with the Street's revenue estimate.
Here are what some key analysts are saying about the results:
POSITIVE VIEWS:
Goldman Sachs: Google's 2Q results, in which price per click (PPC) was up around 3% qoq after falling sequentially the prior three quarters, appear to remove this "vicious spiral" risk. We believe that investors should own Google stock at 17X 2010E EPS for that recovery, and for a sustainable mid-teens yoy revenue / earnings growth rate over 2010-2013. Maintains Buy rating, price target raised to $510 from $486.
Deutsche Bank: While Google delivered in-line/better 2Q results (on lower tax rate), we think the story is becoming more of cyclical growth play (over secular ), as ad budgets increasingly represent the growth constraint (not traffic anymore). The next legs of growth appear to be display ads (2010/2011) & enterprise/OEM licensing/royalties (2011 & beyond), yet paid search should power 17% operating profit dollar growth in 2009. Maintains Buy rating, price target raised to $475 from $425.
Broadpoint.Amtech: "while Google does not provide official guidance, the tone was clearly positive as it definitively noted signs of stabilization in key global markets." Reiterates Buy, price target raised to $520 from $480.
Piper Jaffray: The bottom line is that Google's in-line Q2 and commentary suggest search has stabilized and looks favorable in the back half of 2009. Management's tone has changed since Q1: Eric Schmidt suggested business has "stabilized" in Q2, while we were still in "uncharted territory" in Q1. Google reported revenue slightly above Q1, which was contrary to the seasonality trend management featured on last quarter's conference call (typically Q2 shows less sequential growth than Q1 which was down nearly 4% Q/Q). Additionally, management commented that business has appeared to stabilize. We note that CPC rates were better than expected at up 5% Q/Q, which would seem to suggest that Google ads are converting better than in Q1 and that the consumer is perhaps slightly stronger than expected. Maintains Overweight, price target raised to $494 from $471.
Collins Stewart: Where does GOOG go from here? Though we remain somewhat concerned about the competitive landscape and issues such as higher adoption of SEO, advertisers can deliver some evidences to CSE/Affiliate and social media, in our view, Google remains largely a play on ecn recovery. With signs of stabilization in online ad spend, GOOG is positioned nicely to experience growth acceleration during 2H-09 with arguably flexible cost structure. Maintains Buy, price target raised to $500 from $435.
NEUTRAL VIEWS:
Benchmark: the EPS upside came from a low tax rate. In addition, google.com had slightly disappointing revenue. Furthermore, we expect 3Q09 revenue to be modestly down year-over-year. Maintains Hold.
Soleil Securities: EPS helped by a lower tax rate and strong cost control. Net revenue deceleration continued... GOOG appears expensive if advertising weakness elongates... We believe it is still too early to buy the shares and note that other ad-driven stocks under our coverage have corrected 10-20% over the past 6 weeks while GOOG has not. Maintains Hold, $400 tgt.
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