Google earnings: What is Wall Street saying?

The search giant beat estimates, thanks in part to a lower-tax rate. Analysts were largely positive, as ad trends continue to improve.

By TheStreet Staff Apr 19, 2013 12:37PM

thestreet logoThe Google logo is seen on a podium and projected on a screen at Google headquarters in Mountain View, Califorina Paul Sakuma, AP By Chris Ciaccia


Google (GOOG) beat earnings expectations, and while the quarter was helped by a lower tax rate (TheStreet), it's clear ad trends continue to improve, especially in mobile.


Cost-per-click, a key metric related to advertising, fell 4% year over year and 4% sequentially from the fourth quarter. Overall, the Mountain View, Calif., company reported earnings on Thursday of $11.58 a share on $13.97 billion in revenue. Analysts polled by Thomson Reuters were expecting $10.66 per share on $14.09 billion in revenue.


Here's what analysts around Wall Street are saying about the company:


UBS analyst Eric Sheridan, who rates shares "buy" and has $945 price target in the stock, believes investors should avoid the noise in the current, including accounting changes to Google Play, as Google Sites revenue growth remains above trend.


"We continue to expect improvement in the CPC trend (has flattened at -4% YoY in last 2 quarters) as PLAs & AdWords Enhanced Campaigns lift CPCs. We expect Google Sites revenue growth will remain in the high-teens as advertisers continue to increase budgets to Google. Investors should ignore the noise around this earnings print (Motorola, search policy changes & accounting changes) and focus on strong Websites ad growth as a catalyst for revenue growth in 2H '13."


Deutsche Bank analyst Ross Sandler, who rates shares "buy" but lowered his price target to $930 from $935, notes the quarter was noisy but the trend remains intact.


"Google reported core revenue and EPS 2% and 9% above consensus expectations on steady growth, and one-time benefits from new revenue recognition and lower tax rate, overall we view the results as largely in-line. Ad revenue decelerated from 19% to 16% Y/Y on additional partner site policy changes, but core O+O sites revenue accelerated modestly. US growth lagged international again in 1Q, as most of the partner clean up is showing up in the US, and the search market is more mature. Overall, we remain upbeat on Google's prospects for 2013, and at 17x 2013 EPS, we continue to view the risk/reward as favorable and would selectively add to positions."


Cantor Fitzgerald analyst Youssef Squali, who rates shares "buy" with a $900 target, expects to see further monetization improvement this year and next, as Product Listing Ads (PLAs) and Enhanced Campaigns continue to roll out.


"The company's core growth remains above industry levels for both online advertising and ecommerce, and with the rollout of Enhanced Campaigns and PLA overseas, and Display continuing to show material traction, we expect to see further improvement to monetization in 2H:13 and 2014."


JPMorgan analyst Doug Anmuth, who rates shares "overweight," is confident that Google will continue to deliver, with Larry Page is running the show.


"Mixed trends could lead to diverging views on Google coming out of the quarter, but we'd be buying any weakness in Google shares. We remain positive on Google as mobile and display, Enhanced Campaigns, and Google Shopping/PLAs should drive strong Y/Y growth in 2H13 and into 2014. We also continue to believe that Google is running well under Larry Page, with increased focus on product innovation and major growth opportunities."


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