Google Stock

Google stock has risen while Apple has fallen in recent months, the firm’s charts – (here) mirroring each other almost exactly. In a recent report by RBC Capital, the research firm has raised its price target for Google Inc (NASDAQ:GOOG) to $950. Tthe research firm’s price target is based on a 18x P/E Multiple on RBC’s 2014 estimates. Analysts from RBC Capital think this multiple is justified given Google’s potential for a 17% EPS CAGR between 2013 and 2015.

Google Inc (GOOG) Price Target Raised To $950:

With its shares up 29% since mid-November, Google Inc (NASDAQ:GOOG) has undergone a re-rating (along with the market) which analysts think is justified and sustainable. Shares of Google Inc (NASDAQ:GOOG) are now trading at 18x RBC’s FY13 Non-GAAP EPS estimate ($45.72). Analysts from RBC think this valuation is reasonable given their projections for a 17% earnings CAGR from 2013-2015. Analysts’ estimates remain unchanged, but the research firm is raising its target P/E Multiple from 16x to 18x on firm’s 2014 estimate ($52.70). RBC’s $950 PT implies 14% upside from current levels.

The Re-Rating Factors:

1) Weakened Mobile Bear Thesis – Per RBC’s 1/23 GOOG EPS note, Google Inc (NASDAQ:GOOG) reported moderating CPC declines in Q4:12. Based on analysts’ channel checks into the impact of Product Listing Ads and Enhanced Campaigns, RBC believe that Google Inc (NASDAQ:GOOG)’s overall CPC trends will likely continue to improve in 2013. The research firm have long believed that Mobile was incremental to – not cannibalistic of – GOOG’s Search growth. And analysts from the firm believe 2013 trends will bear this out.

2) Growing Appreciation Of YouTube As A Derivative Of The Migration Of TV Ad Budgets Online – Again per RBC’s 1/23 GOOG EPS note, Google Inc (NASDAQ:GOOG) reported that the top 100 YouTube advertisers increased their spend by 50% in 2012, due in no small part to the popularity of the TrueView ad format. Analysts believe that YouTube is on track to generate well over $4B in ’13 Revenue.

3) Google Inc (NASDAQ:GOOG) Benefits From Improving International Market Trends – Per RBC’s 2013 Internet Sector Outlook, analysts believe that several Internet stocks, due to their very significant International exposure, will likely benefit from “less worse” trends in Europe and Emerging Markets. Analysts see Google Inc (NASDAQ:GOOG) as one of those.

Image: RBC Capital
Showing: Target/Upside/Downside Scenario

RBC Capital Reiterates Its Outperform Rating:

Google Inc (NASDAQ:GOOG) remains one of the firm’s Top 3 Longs for 2013 – along with (PCLN, $720.92; Outperform, Above Average Risk) and, Inc (NASDAQ:AMZN) (AMZN, $274.19; Outperform, Above Average Risk). MMI integration, Mobile Monetization uncertainty, and the spectre of European regulatory action remain significant overhangs. But recently reported TAC and CPC trends, bolstered by research firm’s channel checks, have taken a significant bite out of the Mobile Bear Thesis. Analysts from RBC still see significant moats around GOOG’s core Search and Display advertising business and have confidence in the execution and innovation track record of the management team.