Google (GOOG): Target upped to $670 at BAC; expect buy interest

From Notable Calls

Banc of America is upping their tgt on Google (NASDAQ: GOOG) to $670 from $620 as they are raising their Q3 and '08 estimates on strong revenue growth driven by 1) accelerating US search query growth, +60% Y/Y in Jul-Aug, vs. 54% Y/Y growth in 2Q; 2) continued monetization improvements due to the top ad placement algorithm change; 3) growing international footprint, including market share gains in China (+400 bps Q/Q to 22.8% in Q2); 4) few signs of a slowdown in online financial services ad spend, which could even be a tailwind; and 5) positive currency tailwinds with the USD down 2% Q/Q in Q3 (vs. GBP, Euro, Yen).

While it is clear that the Street expects GOOG to continue taking search share from its competitors, what impresses BAC is that Google's query growth seems to be accelerating. An analysis of comScore data reveals that GOOG's Q3 Y/Y search query growth in the US may be accelerating from Q2 levels. Google's core web search volume on its own sites grew 60% Y/Y in July through August 07, compared to 54% Y/Y growth in 2Q07, which gives the firm increased confidence in their Q3 revenue and EBITDA numbers.

BAC is increasing their 3Q07 revenue from $2.97B to $3B (due to stronger than expected query growth), EBITDA from $1.68B to $1.75B, and operating EPS from $3.77 to $3.89.

Notablecalls: While GOOG stock has been a strong performer lately, I suspect today's BAC call will generate some early buy interest as they won't be the only ones upping GOOG's ests in the n-t.

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