Google Inc (NASDAQ:GOOG) shares are expected to open 4 percent lower on Friday, owing to weak second quarter results following which atleast six brokerages lowered the price target of the stock, says a report from Reuters. Revenue for the second quarter came down due to alteration in the advertising system to hike revenue from the mobile subscribers.
Analysts lowering price target
Brokerages who lowered their price targets on internet giants are BMO Capital Markets, JP Morgan (NYSE:JPM), Deutsche Bank AG (NYSE:DB), Raymomd James etc. These research firms lowered the target price by as much as $40 expecting contraction of margins as the company is putting funds in diverse areas.
Lowest price target was $860 as against the closing price of $910.68 of the stock.
BMO analyst mentioned in a note to clients that investors should expect margins to come down, because of margins of other businesses Google Inc (NASDAQ:GOOG) is investing in will be less than the margins of core business. BMO Capital analysts have reduced the target price on Google shares from $915 to $890 per share and maintained “Marketperform” rating on the stock.
Some analysts optimistic, long run
Brokerages like Piper Jaffray, JMP Securities and Canaccord Genuity stated increased price targets for the stock. Piper Jaffray noted that the revenue will expand in the long run with the new system.
“Enhanced Campaigns is the biggest change in the Google ad platform to date and thus it will likely take 6-12 months for the positive impact to show in the numbers,” Piper Jaffray analyst GeneMunster wrote in a note.
Google 2Q performance
Google Inc (NASDAQ:GOOG) reported weak second quarter results on Thursday, with quarterly operating margin of 28 percent, decline from 33 percent in the previous year quarter.
For the second quarter, average price of the online ads declined 6 percent year on year in the second quarter. Google’s results were short of Wall Street’s estimates because of weakening of the company’s ad prices, and widening losses from its Motorola mobile phone business weighed on the bottom line.
In the beginning of 2013, Google Inc (NASDAQ:GOOG) made some changes in the advertisements on its websites and is offering same ads on PCs and mobiles. Margins, however, declined due to cheaper rates on mobile devices.
Google Inc (NASDAQ:GOOG) acquired loss making Motorola mobility unit in 2012, and the subsidiary has posted a loss of $218 million, which is an increase by four times than the $49 million loss posted in the previous year.