UPDATE: BMO Capital Upgrades Google (GOOG) to Outperform

BMO Capital upgraded Google (NASDAQ: GOOG) (NASDAQ: GOOGL) from Market Perform to Outperform with a price target of $670. Analyst Daniel Salmon said the upgrade wasn't a call on tonight's results.

"... rather, it reflects increased confidence in upward estimate revisions in the coming quarters, anchored by stiffening margins." said Salmon. "It does not represent a material change in view, but rather an incremental step from “the positive side of neutral” to the “cautious side of positive.”

The analyst added, "We believe margin stabilization in 2H15 and 2016 will be less about a new CFO simply coming on board and more about Google already focusing its investment on key growth areas; combined with a steady revenue outlook, we believe this will drive multiple expansion as well. That steady revenue view is underpinned by consistent (and lately underappreciated in our opinion) search growth and YouTube’s continued push for TV ad dollars, where we believe it still has a considerable lead over emerging competitors, in large part due to the Google Preferred program. The two factors that could materially improve the Outperform thesis: 1) unleashing the search data set for ad targeting on other O&O properties like YouTube, or perhaps even off-site via DoubleClick or AdSense; and 2) capital return, though it is certainly not expected. The two key risk factors: 1) increased regulatory scrutiny, particularly operating prohibitions more so than fines; and 2) new “moonshots” that put the near-term margin stabilization thesis at risk."

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 $560.22 yesterday.

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