Brian Bolan, research analyst at Jackson Securities, initiated coverage on Google (GOOG) this week with a 'buy' rating -- some points on mobile search and GOOG valuation from his research note:
It's quite obvious that the whole market is engaged in redesigning its search products for a mobile market. Hundreds of millions of dollars worth of R&D budgets are being spent on generating the best mobile search for your PDA or 3G phone.
One of the best examples of this is the relationships that Research In Motion (RIMM) has with many of the search and Internet companies. Google moved quickly to get its products on the popular Blackberry platform. The company synchronized its GMail, GTalk and Maps applications to either work in a seamless fashion with the BlackBerry platform on be directly downloaded to the Blackberry in an attempt to further solidify its foothold in the mobile market. Similar deals were made with Motorola and Nokia, two of the largest mobile device makers.
Making your product more than just mobile ready, but mobile easy will be a key component of future success. We have seen that Google is intent on doing this and believe that they will continue to be a leader in the mobile search and application platform...
As we look to the future we note that the company has noted it will invest more dollars in the business (CapEx) and continue to reap the benefits in the future. We have adjusted our earnings model to show just that, and we have arrived at a CY2006 EPS estimate of $9.63. An implied multiple of 52x earnings gives us a price target of $500 per share.
Looking at the current multiples, we believe now is a good time to build a position in the stock as revenue and earnings growth will continue to outpace the industry.