Google Looks Due for a Bounce

Banc of America is about the only firm defending Google (GOOG) here following yesterday's comScore data.

Firm notes comScore's paid click report indicates GOOG's US paid clicks (core google.com site) grew 3% Y/Y, from roughly flat and 25% Y/Y growth in Jan '08 and Q4, respectively.

While GOOG's Feb paid click data does little to calm investor fears of a slowdown in GOOG's core business, they believe most of the deceleration is due to the continuing quality initiatives by the company itself, which should drive significant upside longer-term. Moreover, they caution investors against reading too much into comScore numbers as they have historically been a bit noisy (but directional nonetheless).

Paid clicks are a function of the number of searches, coverage (% of searches with an ad) and click-through rates (paid clicks per search with an ad). In Feb, GOOG witnessed healthy query growth of 30% Y/Y (vs. 39% in Jan).

While GOOG's ad coverage initiatives are painful in the near term, BofA believes they are necessary to drive sustained revenue growth over the long term.

Reiterates Buy and $700 target.

Notablecalls: BofA's Brian Pitz is right - GOOG's a buy. Hey guys, comScore data didn't bring any surprises. We had several firms (Piper, RBC - both influential analysts on GOOG) come out ahead of yesterday's data saying it's likely going to be bad. Yet we have the stock down almost 20 pts pre-market because Mr. Amazon-to-$800 Blodget said the stock should be down.

The fact is the stock's already in bottoming process, down 40% from the highs. comScore data is partly worse than expected because of GOOG's own doing.

I think GOOG is a buy here. Buy it for the bounce.

Disclosure: no position

Comments

[linenoise:]

Did a carpenter come in and install a floor? This is a pure spec play, plain and simple. If you have 5% of your capital available and a nice pair of reinforced speculator boots, that might not be a bad play. Otherwise, this is just another big cap tech casualty that may or may not recover anytime soon. It can always get chopped again. Never forget that. Maybe buy some put protection if you're playing with this.

2008 Mar 27 11:27 AM