RBC Thinks That Google Is Nearing "Must-Buy Levels"

| About: Alphabet Inc. (GOOG)

Google (NASDAQ:GOOG) shares are trading at close to “must-buy levels,” RBC Capital’s Jordan Rohan asserted in a research note Tuesday morning.

“We believe the recent liquidity-driven market correction has created an attractive entry point for investors,” Rohan wrote. He sees several potential catalysts for the stock, including the inclusion of Postini and other acquisitions into earnings estimates, and “the psychological-but-not-financial upside from YouTube participatory ads.”

He concludes that Google’s earnings are “mostly uncorrelated with broader macro trends,” and that the stock should be bought here. Rohan maintains a $560 price target.

Rohan notes that the stock trades at one standard deviation below the company’s historic average forward P/E, “a level that has proven to be an attractive entry point.”

Meanwhile, Rohan thinks the company could report upside to the consensus estimates for the third quarter; he sees revenue growth of 8.1% sequentially, ahead of the Street consensus of 7.2%. He sees upside driven by organic growth, offset slightly by lower mortgage-related advertising (he notes that mortgage ads are under 5% of revenue).

Rohan also notes that the company continues to gain market share: he points out that ComScore data shows the company has increased its U.S. search market share to 55.2% in July from 46.2% a year ago.

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