Oppenheimer Cuts Price Target on Google (GOOG) As Subsidies, TAC Reduce Margin
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Price: $343.54 -0.12%
Rating Summary:
44 Buy, 6 Hold, 0 Sell
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Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
44 Buy, 6 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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In order to compete with Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG) is subsidizing the cost of its Nexus Android tablets. These subsides are expected to weigh on margins. Increased marketing spend and traffic acquisition costs (TAC) will also weigh on margins, think analysts at Oppenheimer.
"We believe that GOOG is smartly reinvesting its 83% gross margin in driving higher penetration of its Nexus Android tablets, but in the near term, the company will see margin dilution from these costs, as well as higher traffic acquisition costs as the majority of tablet usage and mobile commerce is generated from iOS devices," said analyst Jason Helfstein.
"In addition, we expect higher 1H13 marketing expenses as GOOG pushes greater adoption of Android, Chrome and Maps," added Helfstein.
In response, analysts decreasing 4Q and '13 non-GAAP EPS estimates by 8 and 7 percent, respectively. Oppenheimer also lowered its price target on Google to $730 from $760.
Oppenheimer maintained a Perform rating on Google (NASDAQ: GOOG) and cut its price target to $730.00 (from $760.00).
For an analyst ratings summary and ratings history on Google click here. For more ratings news on Google click here.
Shares of Google closed at $707.38 yesterday.
"We believe that GOOG is smartly reinvesting its 83% gross margin in driving higher penetration of its Nexus Android tablets, but in the near term, the company will see margin dilution from these costs, as well as higher traffic acquisition costs as the majority of tablet usage and mobile commerce is generated from iOS devices," said analyst Jason Helfstein.
"In addition, we expect higher 1H13 marketing expenses as GOOG pushes greater adoption of Android, Chrome and Maps," added Helfstein.
In response, analysts decreasing 4Q and '13 non-GAAP EPS estimates by 8 and 7 percent, respectively. Oppenheimer also lowered its price target on Google to $730 from $760.
Oppenheimer maintained a Perform rating on Google (NASDAQ: GOOG) and cut its price target to $730.00 (from $760.00).
For an analyst ratings summary and ratings history on Google click here. For more ratings news on Google click here.
Shares of Google closed at $707.38 yesterday.
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