The ComScore data is not a perfect match with Google’s revenues; some analysts aren’t convinced the ComScore information is entirely accurate, and in any case it does not include international activity. That said, the fresh signs of weakness has the market worried.
Adding to the pressure, Lehman’s Douglas Anmuth
today cut his price target on the stock to $580 from $644, the latest
entrant in what has become a parade of analysts to trim their
expectations for the company. Anmuth also cut his 2008 EPS estimate for
the company to $18.92 from $20; for ‘09, he goes to $22.29 from $24.04.
Anmuth said he believes Google is being hurt by macro effects on
consumer clicking activity and potentially advertising budgets; he also
says the paid click rates may be showing the results of Google’s
“enhanced quality initiatives.” And he says there are signs of a
slowdown in overall search traffic. Nonetheless, he keeps his
Overweight rating on the stock.
Clayton Moran, an analyst at Stanford Group, made
a similar move today, cutting his target to $500 from $615. He reduced
his 2008 EPS estimate to $19.50 from $20.10; for ‘09 he goes to $23.49,
from $24.49. He says there is “more concern than usual” among Internet
marketers that a recession could meaningfully reduce online ad growth.
A few other tidbits from morning’s batch of Google commentary:
- Mary Meeker, Morgan Stanley: Meeker writes that she still thinks Google’s fundamental business trends are intact. But she also calculates that if ComScore’s data are accurate, and assuming international paid clicks are growing at a 35% rate, the company would have a blended click rate growth of 19%, or 4% sequentially. That, she says, would imply net revenue of $3.52 billion for Q1, or about $120 million short of the $3.64 billion consensus. Meeker, though, is sticking with her above-consensus estimate of $3.72 billion.
- Rob Sanderson, American Technology Research: Sanderson notes that the focus on third-party data on Google reflects the company’s lack of guidance. “As GOOG continus to be a black-box model with no reliable inputs, third-party surveys get more investor attention than deserved, especially following a disappointing quarter,” he writes. “GOOG management has said in many public forms they are not seeing a slowdown. The problem for investors is that management does not provide guidance, so there is nothing to benchmark a slowdown against.”
- Youssef Squali, Jefferies: “While Google’s actual numbers are likely to be materially better than what’s being reported, ComScore’s less than flattering growth trajectory for GOOG does point to continued decelerating growth, and is likely to keep the stock under pressure short term.”
Google today is down $11.04, or 2.4%, to $447.15.
