Buy Google on Bing Related Weakness - RBC

Any share price weakness related to the early success of Microsoft Corp.’s (MSFT) Bing search engine should be used as a buying opportunity in Google Inc. (GOOG), according to a new report from RBC Capital Markets.

Analyst Ross Sandler said Google remains the best way to play a global recovery in online advertising, and maintained an Outperform rating and $500 price target on the stock.

Bing was released in early June and numbers from ComScore show that Microsoft’s share of the U.S. Web search market rose from 8% in May to 12.1% in the week ended June 12. Meanwhile, Hitwise said Bing occupied 5.25% of the U.S. online search market in June, growing at an average rate of 25% per week during the period.

Mr. Sandler increased his second quarter estimates for Google’s quarter-over-quarter net revenue growth from -3% to +1% and for earnings per share from $4.91 to $5.11.

He thinks the company’s U.S. gross revenue looks flat on a quarterly basis due to better performance from small and medium-size business versus larger advertisers, while International results appear to be down slightly.

As for margins, the analyst told clients they are a wildcard for the second quarter, but sees non evidence for them to shift from a run-rate of 63% currently.

So while the whisper number may move slightly from flat to down, RBC is comfortable with Google shares heading into the quarter.