Google Results Something to Cheer About

Google Inc. gave Wall Street some much needed good news when it reported its third-quarter results were better than analyst consensus. Along with continued growth in its search engine queries and the belt-tightening of capital expenditures, Google reported a 26% hike in profits to $1.35-billion or $4.24 per share.

Although the results were in-line with his expectations, Canaccord Adams equity analyst Colin Gillis says Google’s third-quarter should be viewed as a positive for investors.

“[Google’s] management has shown a willingness to adjust its stance on hiring and spend to lever the existing business to increase cash flow,” Mr. Gillis wrote in a note to clients today. Mr. Gillis maintains a “buy” rating and $650 price target on Google shares.

Citigroup Capital Markets analyst Mark Mahaney took a more cautious approach, reiterating a “buy” rating but lowering his price target from $590 to $480. Although the company’s fundamental trends have begun to soften, it has occurred less than expected and its operating margin has begun to show positive signs that a tipping point is near, Mr. Mahaney said in a note.

“Against a backdrop of material macro concerns, these are impressive results. Though not immune, Google is clearly more resilient to macro headwinds than other companies. Google is gaining share and continues to have significant option value in display [ads], mobile, etc.,” Mr. Mahaney said.

Curtailed spending and improved revenue growth was found to be a some of the main reasons RBC Capital Markets analyst Ross Sandler upped his price target on Google from $500 to $525. However, Mr. Sandler advised investors to not dismiss Google’s flat revenue in the U.K., a slowdown in network revenue and the ongoing economic turmoil.

“Google remains our best idea in large-cap Internet, and while the 3Q08 performance was better than expected, we continue to carry a cautious stance given the weakening advertising environment,” Mr. Sandler said.

J.P. Morgan analyst Imran Khan continues to bullish on Google, despite weakening economic conditions and maintains an “overweight” rating.

“The valuation is attractive and the company is well positioned to weather the recession,” he said.

“Google is a franchise name that we feel will do well in a weak economy for the following reasons: 1) it will likely consolidate market share and grow organically in a weak economy, 2) it has a presence in high growth international markets, and 3) we see shifts in domestic ad spend toward performance-based advertising.”

Comments

[jerry w.:]

As I have said all along goog is still a fantastic investment. There is no way you could go wrong in investing in goog. I predicyed they would come out witha good report, now I am telling to invest whatever you can afford in goog. jerry w.

2008 Oct 17 07:03 PM

[GoogleDoubter:]

Good numbers from Google. Nothing earth shattering but also nothing to be excited about. They made their numbers by paying less taxes.

The question is how will Google frow the search business in a recession/depression during the next phase of the interesting day and age in which we reside.

Today would have been the best day to own the stock and yet the gain for the day was very modest.

The posting above sounds like someone who has a vested interest in Google stock. I am niether long or short at this time, but have been both long and short in the past.

This market is way to wild to be predicting anything short or medium term.

2008 Oct 17 07:19 PM

[stocks:]

Goog did a good job on their market.

2008 Oct 18 08:25 PM