Wall Street Weighs in on Google (GOOG) Earnings Debacle; a Few Bulls Run Away, Others Dig In
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Price: $156.25 -0.77%
Rating Summary:
41 Buy, 6 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
Rating Summary:
41 Buy, 6 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
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Google (NASDAQ: GOOG) created outrage on Wall Street Thursday after its filing firm accidental released third quarter results early and the numbers were anything put strong. The company missed analysts views on the top and bottom-line and shares sold off 8 percent. Now that analysts have had time to digest the numbers and hear from a raspy-voiced Larry Page, they have weighed in. Overall, the stock lost a few bulls, bears took a victory lap, and the remaining bulls said the weakness creates a great opportunity to load up.
Oppenheimer Jason Helfstein- "We are downgrading GOOG shares to Perform from Outperform following weaker than expected 3Q earnings, reflecting higher spending on Nexus tablet subsidies and the drag of the Motorola losses. While core advertising revenues were in line ex FX, we are reducing 4Q and 2013 non-GAAP EPS estimates by 5% and 6%, respectively, to reflect lower margins. As a result, we are reducing our price target to $765 from $800, suggesting only 10% upside from current levels. This assumes investors will value the stock at 16x 2013 non-GAAP EPS or using a market multiple on 2015, discounted back at 10%." Downgrade from Outperform to Perform, target from $800 to $765.
Nomura Brian Nowak - GOOG reported 3Q:12 results below us and the Street. Core GOOG gross advertising revenue came in 3% below us and the Street, and advertising revenue ex-TAC came in 5% below us. GOOG’s mobile business is indeed ramping and reaching scale as the company said its mobile revenue is now running at an $8bn annualized run-rate, up ~220% from the $2.5bn annualized run-rate in 3Q:11. In the near-term, lower mobile monetization and cannibalization away from desktop searches is impacting GOOG’s total revenue growth. We are lowering our forward EPS by 7% and our PT from $900 to $840. Near-term numbers will need a resetting, but we continue to like GOOG’s long-term position to keep winning in search regardless of the platform. FY12E EPS from $43.26 to $40.36; FY13E EPS from $50.88 to $47.47." Maintain Buy, price target from $900 to $840
Goldman Sachs Heather Bellini - "Google reported total F3Q12 net revenue of $11.33bn and non-GAAP EPS of $9.03, below consensus of $11.86bn and $10.15 (GSe $11.76bn and $10.23). MMI accounted for $300mn of the shortfall, with the balance from the core ad business (consensus net revenue of $8.99bn versus actual results of $8.75bn). While currency impacted total revenue by roughly $580mn, this quarter’s adjusted yoy growth rate of 24% yoy still represents deceleration versus the 25% constant currency growth reported in 2Q12." Maintain Neutral $680 price target.
Jefferies Brian Pitz - "Earnings came early and at first glance, it was a big miss. Motorola was a disappointment, and margin saw pressure from hardware like the Nexus 7 tablet, which likely sold 1MM+ units in 3Q. But it wasn't all bad, as FX headwinds masked operational strength. And with mobile run-rate rev tripling Y/Y to $8B, Google looks best positioned to benefit as mobile usage continues to soar." Maintain Buy, $850 price target.
Evercore Partners Ken Sena - "Although Google reported a disappointing third quarter with revenue and EPS well below our estimate, a closer review of the result leads us to conclude that the miss was largely non-secular in nature, suggesting the stock's pull-back offers a better buying opportunity." Maintain Overweight, price target cut from $860 to $830.
Baird Colin Sebastian - "Google missed both revenue and EPS estimates, but FX was mostly to blame. Notably, the miss exceeded both our, and we believe, Street estimates. Separately, Motorola revenue was also weaker than expected as was the non-GAAP loss but we think this is mostly related to the cutbacks and retooling that Google is performing at MMI. Overall however the key trends remain in place and all of Mobile, Android, YouTube and Search remain on firm footing." Maintains Outperform, target from $850 to $830.
Wedbush James Dix - "Google's $9.03 in EPS missed our $10.61 estimate/Street $10.56 estimates, reflecting lower euro zone growth, lower core margins and higher MMI operating loss than expected. We see shares range-bound at new lower levels, as call hit on 1) size of f/x impact – which was given in release (~6 points of growth) – due to movements of non-hedged currencies, 2) higher mobile run-rate (now $8bn gross revenue, including some content revenue), which still could not keep Google sites from missing (up 13% vs. our 20% estimate and 21% 2Q growth), and 3) reasons for margin miss (f/x, Nexus costs, higher Network revenue mix)." Maintains Neutral, price target down from $690 to $675.
Pivotal Brian Wieser - "In what was a complicated set of results to assess, we believe Google's 3rd quarter earnings were not as bad as we initially feared, and they even offered some very positive news strategically. Further, our long-term thesis on the company remains broadly unchanged, if not reinforced by the results. However, the flow-through effects of changes to expectations for current and subsequent quarters yields a reduction in our expectations of cashflow generation from the company in years ahead. This is among the primary factors which lead us to reduce our target price on the stock." Maintains Buy, target from $880 to $800
Wells Fargo Jason Maynard. "Google reported lower-than-expected results for Q3 with revenues, margins, and underlying ad metrics all coming in below expectations. The company struggled this quarter as hardware operating losses and ongoing declines in CPC rates hurt profitability. Google noted strong growth in the U.S. (+23% y/y) and UK (+15% y/y). The FX headwind to revenue was 1% in the quarter, vs. our expectation of 2%; however, this was hedged from a 5% negative impact. CPC declined 15% in the quarter. Removing the FX impact, the decline would have only been 10%, which was in line with our model. The company disclosed that the mobile business was now on a $8B run rate, which clearly had an impact on CPC. We now project 2012 revenue of $41.0B and EPS of $39.50, vs. prior $40.4B and $42.00. These estimates reflect a slightly higher MMI contribution, and a corresponding decline in gross margin. Likewise, we are now projecting FY2013 revenue of $52.3B and EPS of $48.00, which is down from $53.8B and EPS of $50.00 previously. Given our reduced estimates, we believe that the shares are fairly valued at current levels." Maintain Market Perform $680-$720 target.
Deutsche Bank Ross Sandler - "Google reported core net revenue and EPS that were 3% and 15% below consensus expectations. The revenue miss was largely a result of deceleration in core US and International advertising growth as Google Websites slowed on tougher comps and a significant FX headwind. Core EBITDA margin (ex-MMI) was 51.7%, but after stripping out impact from Nexus was estimated at 54.1% down 100bps from last quarter. Overall, 3Q results are disappointing, but we still view GOOG shares as one of the most compelling risk/reward trade-offs in large cap and want to own it into the 4Q holiday season." Maintains Buy, price target from $890 to $850.
Cantor Fitzgerald Youssef Squali - "We've seen this movie before! back in January 2012, when Google missed 4Q:11 Street estimates, and the stock was off 9% post-close. Similarly, 3Q:12 results missed on FX, and to a lesser extent, on lower revenues from Motorola, causing an 8% sell-off post- close. Adjusted for both, Google had a solid quarter, with core U.S. business up 23% Y/Y, U.K. up 20%, and ROW up 26%. Granted, U.K. and ROW's growth rates were slightly below 2Q levels (23% and 29%, respectively), but then again the European macro environment seems that much weaker. Given GOOG's ~30% jump since 6/30, we're not shocked by investors' post-print reaction, but we would be surprised if the stock did not crawl its way back to pre-print levels over the next several months, given that the growth thesis remains intact and the valuation (at 9.0x EV/EBITDA and 16.5x P/E on our FY13 estimates) remains compelling." Maintain Buy, price target down from $830 to $820.
Needham & Company - "We believe Google remains a compelling investment for two reasons: First, on an FX neutral basis international revenue growth was essentially in-line with expectations, and U.S. search revenue accelerated slightly. Second, we believe Android is well positioned to serve as the engine of growth for Google for the next decade." Maintains Buy, $825 price target.
Oppenheimer Jason Helfstein- "We are downgrading GOOG shares to Perform from Outperform following weaker than expected 3Q earnings, reflecting higher spending on Nexus tablet subsidies and the drag of the Motorola losses. While core advertising revenues were in line ex FX, we are reducing 4Q and 2013 non-GAAP EPS estimates by 5% and 6%, respectively, to reflect lower margins. As a result, we are reducing our price target to $765 from $800, suggesting only 10% upside from current levels. This assumes investors will value the stock at 16x 2013 non-GAAP EPS or using a market multiple on 2015, discounted back at 10%." Downgrade from Outperform to Perform, target from $800 to $765.
Nomura Brian Nowak - GOOG reported 3Q:12 results below us and the Street. Core GOOG gross advertising revenue came in 3% below us and the Street, and advertising revenue ex-TAC came in 5% below us. GOOG’s mobile business is indeed ramping and reaching scale as the company said its mobile revenue is now running at an $8bn annualized run-rate, up ~220% from the $2.5bn annualized run-rate in 3Q:11. In the near-term, lower mobile monetization and cannibalization away from desktop searches is impacting GOOG’s total revenue growth. We are lowering our forward EPS by 7% and our PT from $900 to $840. Near-term numbers will need a resetting, but we continue to like GOOG’s long-term position to keep winning in search regardless of the platform. FY12E EPS from $43.26 to $40.36; FY13E EPS from $50.88 to $47.47." Maintain Buy, price target from $900 to $840
Goldman Sachs Heather Bellini - "Google reported total F3Q12 net revenue of $11.33bn and non-GAAP EPS of $9.03, below consensus of $11.86bn and $10.15 (GSe $11.76bn and $10.23). MMI accounted for $300mn of the shortfall, with the balance from the core ad business (consensus net revenue of $8.99bn versus actual results of $8.75bn). While currency impacted total revenue by roughly $580mn, this quarter’s adjusted yoy growth rate of 24% yoy still represents deceleration versus the 25% constant currency growth reported in 2Q12." Maintain Neutral $680 price target.
Jefferies Brian Pitz - "Earnings came early and at first glance, it was a big miss. Motorola was a disappointment, and margin saw pressure from hardware like the Nexus 7 tablet, which likely sold 1MM+ units in 3Q. But it wasn't all bad, as FX headwinds masked operational strength. And with mobile run-rate rev tripling Y/Y to $8B, Google looks best positioned to benefit as mobile usage continues to soar." Maintain Buy, $850 price target.
Evercore Partners Ken Sena - "Although Google reported a disappointing third quarter with revenue and EPS well below our estimate, a closer review of the result leads us to conclude that the miss was largely non-secular in nature, suggesting the stock's pull-back offers a better buying opportunity." Maintain Overweight, price target cut from $860 to $830.
Baird Colin Sebastian - "Google missed both revenue and EPS estimates, but FX was mostly to blame. Notably, the miss exceeded both our, and we believe, Street estimates. Separately, Motorola revenue was also weaker than expected as was the non-GAAP loss but we think this is mostly related to the cutbacks and retooling that Google is performing at MMI. Overall however the key trends remain in place and all of Mobile, Android, YouTube and Search remain on firm footing." Maintains Outperform, target from $850 to $830.
Wedbush James Dix - "Google's $9.03 in EPS missed our $10.61 estimate/Street $10.56 estimates, reflecting lower euro zone growth, lower core margins and higher MMI operating loss than expected. We see shares range-bound at new lower levels, as call hit on 1) size of f/x impact – which was given in release (~6 points of growth) – due to movements of non-hedged currencies, 2) higher mobile run-rate (now $8bn gross revenue, including some content revenue), which still could not keep Google sites from missing (up 13% vs. our 20% estimate and 21% 2Q growth), and 3) reasons for margin miss (f/x, Nexus costs, higher Network revenue mix)." Maintains Neutral, price target down from $690 to $675.
Pivotal Brian Wieser - "In what was a complicated set of results to assess, we believe Google's 3rd quarter earnings were not as bad as we initially feared, and they even offered some very positive news strategically. Further, our long-term thesis on the company remains broadly unchanged, if not reinforced by the results. However, the flow-through effects of changes to expectations for current and subsequent quarters yields a reduction in our expectations of cashflow generation from the company in years ahead. This is among the primary factors which lead us to reduce our target price on the stock." Maintains Buy, target from $880 to $800
Wells Fargo Jason Maynard. "Google reported lower-than-expected results for Q3 with revenues, margins, and underlying ad metrics all coming in below expectations. The company struggled this quarter as hardware operating losses and ongoing declines in CPC rates hurt profitability. Google noted strong growth in the U.S. (+23% y/y) and UK (+15% y/y). The FX headwind to revenue was 1% in the quarter, vs. our expectation of 2%; however, this was hedged from a 5% negative impact. CPC declined 15% in the quarter. Removing the FX impact, the decline would have only been 10%, which was in line with our model. The company disclosed that the mobile business was now on a $8B run rate, which clearly had an impact on CPC. We now project 2012 revenue of $41.0B and EPS of $39.50, vs. prior $40.4B and $42.00. These estimates reflect a slightly higher MMI contribution, and a corresponding decline in gross margin. Likewise, we are now projecting FY2013 revenue of $52.3B and EPS of $48.00, which is down from $53.8B and EPS of $50.00 previously. Given our reduced estimates, we believe that the shares are fairly valued at current levels." Maintain Market Perform $680-$720 target.
Deutsche Bank Ross Sandler - "Google reported core net revenue and EPS that were 3% and 15% below consensus expectations. The revenue miss was largely a result of deceleration in core US and International advertising growth as Google Websites slowed on tougher comps and a significant FX headwind. Core EBITDA margin (ex-MMI) was 51.7%, but after stripping out impact from Nexus was estimated at 54.1% down 100bps from last quarter. Overall, 3Q results are disappointing, but we still view GOOG shares as one of the most compelling risk/reward trade-offs in large cap and want to own it into the 4Q holiday season." Maintains Buy, price target from $890 to $850.
Cantor Fitzgerald Youssef Squali - "We've seen this movie before! back in January 2012, when Google missed 4Q:11 Street estimates, and the stock was off 9% post-close. Similarly, 3Q:12 results missed on FX, and to a lesser extent, on lower revenues from Motorola, causing an 8% sell-off post- close. Adjusted for both, Google had a solid quarter, with core U.S. business up 23% Y/Y, U.K. up 20%, and ROW up 26%. Granted, U.K. and ROW's growth rates were slightly below 2Q levels (23% and 29%, respectively), but then again the European macro environment seems that much weaker. Given GOOG's ~30% jump since 6/30, we're not shocked by investors' post-print reaction, but we would be surprised if the stock did not crawl its way back to pre-print levels over the next several months, given that the growth thesis remains intact and the valuation (at 9.0x EV/EBITDA and 16.5x P/E on our FY13 estimates) remains compelling." Maintain Buy, price target down from $830 to $820.
Needham & Company - "We believe Google remains a compelling investment for two reasons: First, on an FX neutral basis international revenue growth was essentially in-line with expectations, and U.S. search revenue accelerated slightly. Second, we believe Android is well positioned to serve as the engine of growth for Google for the next decade." Maintains Buy, $825 price target.
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