Google (GOOG) Price Target Reduced to $625 at Deutsche Bank

Deutsche Bank maintained a Buy rating on Google (NASDAQ: GOOG) and reduced its price target to $625.00 (from $665.00). Analyst Ross Sandler continues to view Google as a top idea and a safe-haven in tech.

"Positive trends in 1Q: Aside from the one-time expense items related to recent M+A, 1Q14 results were largely in-line across the board. Website revenue remains a critical metric for the health of Google’s overall search and YouTube businesses, and posted strong growth +21% y/y to $10.47B (vs. cons $10.47B). Google will begin disclosing paid clicks and CPC based on Websites and Network starting in 2Q14, providing investors with greater transparency. The pace of gross margin compression (GP to net revenue) is down to a manageable 80bps after around 500bps throughout 2013, as Google rolls through on Nexus and accounting policy changes," said Sandler.

"Negative items to monitor: EBITDA margins for Google core were ~49.3% we estimate (using $1.06B in core D&A), down 280bps y/y. One-time expense items related to the acquisitions of Nest and other start-ups created 190bps of de-leverage in G+A (vs. 67bps of leverage in 4Q) for an estimated ~$200M impact to EBITDA in 1Q, which won’t recur according to Google. Growth in the UK (ex-FX) decelerated by 4ppts q/q to 11% on Network and tough weather comp. Other revenue grew 48% y/y in 1Q14 vs. 99% y/y in 4Q13, the deceleration mostly from the comping of Nexus 4 and the Google Play accounting policy change last year in 1Q13 (which likely contributed to the 300bps deceleration in ROW as well). Lastly, higher investment gains on the interest income line contributed $0.30 upside to the bottom line PF EPS in 1Q," he said.

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 $556.54 yesterday.

You May Also Be Interested In

• Boston Scientific (BSX) PT Raised to $83 at Stifel
• Equifax (EFX) PT Lowered to $263 at Citi
• Owens Corning (OC) PT Raised to $172 at Evercore ISI