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Goldman Sachs analyst James Mitchell Wednesday repeated his Buy rating on Google (GOOG) and raised his price target on the stock to $486, from $414. The stock closed yesterday at $426.56.

Mitchell lifted his revenue and EPS targets for 2009, 2010 and 2011:

  • For 2009, he now sees revenue of $16.65 billion and EPS of $21.30, up from $16.25 billion and $20.89.
  • For 2010, he now sees revenue of $19.01 billion and EPS of $23.36, up from $16.65 billion and $21.53.
  • For 2011, he now sees revenue of $21.71 billion and EPS of $27.02, up from $19.64 billion and $24.19.

Mitchell’s note Wednesday focused on the company’s huge presence in emerging markets. He estimates that 30%-40% of traffic - and a lesser but still material proportion of paid leads - from emerging markets. He writes that queries and paid leads are growing 2x-3x faster in emerging markets than in the U.S. and Europe, although they produce significantly lower prices per click.

To adjust for the growth in emerging markets, Mitchell moved up his estimate on paid lead growth through 2013 by about 5 percentage points to a CAGR of about 12%. That has the effect of reducing overall price per click growth. But he doesn’t see any real imapct on margins, asserting that this is because most GOOG expenses do not vary directly with traffic and the company may be less dependant on TAC agreements in emerging markets.

GOOG Wednesday is up 62 cents, or 0.1%, to $429.02.

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Source: Google Upgraded on 'Huge Presence' in Emerging Markets