In a report published on Friday, Jefferies analyst Brian Pitz reiterated a Buy rating and a $1000 price target on Google Inc (NASDAQ:GOOG). Jefferies Group LLC (NYSE:JEF) stated that their proprietary Product Listing Ad (PLA) checks confirm more advertisers are running more ads than ever, confirming  that  Google  Shopping  is  a  success  despite  the  new  fees.

Jefferies: Optimistic ahead of Google’s earnings

They reiterate Buy ahead  of earnings as traffic data looks solid,  with core desktop search and  YouTube  looking  especially  strong  for  the  quarter.  Margin  is  the  wild  card  and  will depend on Motorola Mobility Holdings Inc (NYSE:MMI) plus the number of Nexus devices sold through Google Play. With shares  trading  within  a  reasonably  tight  band  since  May, they  still  think  Google Inc (NASDAQ:GOOG)  looks attractively  valued  (~13.4x  ex-cash  their  2014  ests.)  for  a  stock  with  such  a  compelling growth story.

In terms of products, Google is executing on multiple fronts as it extends its lead across a number  of  core  services.  They are  particularly  optimistic  about  YouTube,  Android  and Maps, which has significant go-forward revenue potential.  For the quarter, their estimates are as follows:

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Jefferies : Paid click growth faces (Very) tough comps in 2Q

For 2Q, they expect Paid Click growth of +16 percent Y/Y and CPC (cost per click) declines of -1.8 percent Y/Y. Note in 2H 2011, the explosion of mobile searches (in addition to the mix-shift towards International traffic, etc. ) drove rapid Paid Click growth at the expense of CPC (see chart below). On the heels of  these  changes,  Paid  Click  and  CPC  Y/Y  growth  will  face  very  tough  and  very  easy comps, respectively. As  Google  monetizes  more  ads  on  a  non-CPC  basis,  they  think  Paid  Click  growth  is  the most important indicator of a healthy advertiser ecosystem going forward.

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Google is still seeing nice growth in desktop search volume

Traffic data from COMSCORE, Inc. (NASDAQ:SCOR) gives confidence ahead of earnings. The  following  chart  tracks  (explicit  core)  desktop  searches  in  the  US,  as  measured  by comScore.  Despite  the  rapid  growth  of  mobile  searches  –  which  are  excluded  from  this chart – Google Inc (NASDAQ:GOOG) is still seeing nice growth in desktop search volume.

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Product Listing Ad (PLA) usage remains strong in 2Q 2013

Jefferies Group LLC (NYSE:JEF) track  more  advertisers  running  more  ads  than  ever  before  in  the  US, confirming  that  Google  Shopping  is  a  success  despite  the  new  fees.  When Google Shopping transitioned its US program to a paid service on October 17, 2012, some feared retailers would balk at paying Google Inc (NASDAQ:GOOG) for a previously free service. This has proven not to be the case, as PLA usage is accelerating in both the US and the UK.

These high-performing ad units are ROI positive for advertisers and as such they continue to  forecast  rapid  adoption  by  retailers,  especially  as  we  approach  the  key  holiday shopping  season.  They  track  wide  adoption  across  a  broad  spectrum  of  verticals,  but particularly  in  the  Clothing  &  Shoes,  Home  &  Garden,  and  Beauty  &  Personal  Care categories, where an image of the product can ensure the user has found the exact item (correct color, etc.) before clicking the ad. In these top-three verticals, between ~55-70 percent of keywords now return a PLA.

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