Google gets $700 price target
UBS says Google's ad prices have rebounded. New target suggests shares undervalued by more than 20%.
By Scott Moritz, TheStreet.com
It isn't Google's Android mobile phone success, nor its upcoming Chrome computer operating system. UBS put a $700 price target on the stock Thursday because of a rebound in Internet advertising prices, suggesting the shares are undervalued by more than 20%.
UBS analysts say October cost-per-click and keyword pricing improved from September. If true, this is a bullish sign that Google's core search ad business may be enjoying a recovery.
The note comes as Google's Android effort takes a big step up on the wireless stage, with seven phones selling at more than a dozen phone companies. Google (GOOG) is also set to release its Chrome operating system to developers, the boldest attack yet on Microsoft's PC software kingdom.
Search advertising accounts for 97% of Google's total sales, which exposed Google to the dramatic downturn in ad spending during the financial crisis. But Google muddled through a rough year and held on to its dominant position in the industry.
ComScore data this week showed that Google gained half a percentage point in overall sequential search market share in October despite a strong showing by Microsoft's Bing service. Google held 65.4% of the market while Bing came in at 9.9% and Yahoo! slipped half a percentage point to 18%, according to ComScore.
Google stock has climbed 87% this year, beating the 57% gain of the S&P 500 Information Technology Index. The shares closed at $576.65 yesterday.
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The offering could become the second-biggest this year if underwriters exercise an option to buy more shares.
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