Analysts at BMO Capital Markets believe Google Inc (NASDAQ:GOOG) has climbed a “wall of worry”.

Google logo

According to Daniel Salmon and Ygal Arounian, both analysts at BMO Capital Markets, the continued decline of the search engine giant’s cost-per-click is less compelling to value investors. The analysts believe that the benefit of growth from investors rotating out of Apple Inc. (NASDAQ:AAPL) in recent months will start to subside.

Salmon and Arounian explained that the most important part of Google (NAADAQ:GOOG)’s fourth quarter financial report on January 22 was the strength of its stock the following day, despite the continued decline in the cost-per click. According to them, the situation indicated a major change in investors’ sentiment, and it served as a big eye-opener that the market has become comfortable with the idea of secular pricing declines across online advertising, and instead is focused on the rate of CPC declines.

The analysts emphasized that the first decline of CPC in 4Q11, through the past summer, resulted in a decidedly negative turn.  According to them, since the search engine giant started climbing the wall of worry, it has become one of the important drivers of the company’s stock.

In addition, the analysts clarified that they consider several factors in gauging Google’s CPC numbers and the company’s ad prices could still increase. They observed that Google’s quarterly paid clicks and CPC seemed to change dramatically when the company tried to make a change to test a new product, such as the ad changes implemented in 4Q11 that created more supply through SiteLinks.

Furthermore, Salmon and Arounian said, “Although we believe online ad pricing remain in secular declines, there are pockets of strength focused on mobile (too often the low prices and not the growth gets the focus, in our opinion), online video, social, and native advertising.”

Furthermore, the analysts wrote, “Our view of Google as a 15%-20% top line grower with gradual margin erosion is unchanged. Combined with a lack of share buyback or any other EPS growth accelerant , we believe this profile is less compelling to value investors at 17x versus 12x.”

They downgraded their rating for the shares of Google Inc (NASDAQ:GOOG) from outperform to market perform, and maintained the $790 price target.

Salmon and Arounian view the multiple expansion of Google beyond its current level a challenge. According to them, iwill become upbeat again on the stock if they see positive response to new Motorola products after the company works through the 12-18 months backlog it inherited, dynamic YouTube monetization, and a return of capital to shareholders.