Google Inc (GOOG) might be the go-to search engine for many, but when it comes to paying top dollar for mobile ads, people aren’t willing to pay the price. On average, marketers paid 11% less per ad in the fourth quarter compared to the previous years. However, more people bought ads overall, resulting in 31% profit from a year ago. Meaning, while advertisers pay less for ads, more ads are being bought overall.
In addition to 31% ad profit from the previous year, GOOG reported sales of $16.9 billion in the fourth quarter, up 17% from last year. Profits also grew to $3.9 billion (a 17% rise).
Google also announced that it was selling Motorola Mobility (it’s mobile phone unit). Even though they bought it in 2012 for $12.5 billion, they are selling it for only $2.9 billion. However, the company is keeping most of Motorola’s patents, as well as the $3 billion the division had in cash.
Nomura Holdings analyst Anthony Diclemente recommends to BUY GOOG “Given the material operating losses Google had incurred from MMI since the initial acquisition, we believe investors will view the transaction positively. Importantly, Google maintains ownership of the vast majority of the Motorola Mobility patent portfolio, the primary driver of Google’s acquisition of MMI, in our view. This ongoing patent ownership likely allows for Google to maintain its defense against Android- related lawsuits. All in all, keeping the patents while selling the loss- making hardware unit is the most strategically and financially desirable outcome for Google.”
Anthony went on to defend his rating by noting that “While some may look back on Google/MMI as a strategic misstep, the analyst would note that: 1) it is very difficult to put a price tag on the Motorola Mobility patent portfolio, which is likely valuable in legally defending Android; and 2) it is possible that the learnings from Google’s ownership of Motorola could potentially inform Google’s hardware and device strategy going forward (Chrome, Nexus, Google-branded devices, etc.).”
Anthony DiClemente is ranked 2073 of 2367 analysts with a 49% success rate and -2.7% average return. Anthony’s previous GOOG recommendaitons, however, have netted him +0.3%, +7.8%, and +2.9% over the average S&P 500.
Even before Google’s earning report came out, Jefferies analyst Brian Pitz reiterated a BUY rating for GOOG, due to good trends from the holiday quarter. Brian noted that “digital marketing firms Kenshoo, ChannelAdvisor, RKG and IgnitionOne have all published data showing a meaningful increase in Product Listing Ads by online retailers….[these] reports confirm the findings of their proprietary study on PLAs, which was done in December.”
Furthermore, Brian explained that GOOG’s fourth quarter traffic trends also look good, according to comScore data…and that Android saw meaningful gains in market share around the globe during the fourth quarter, according to Kantar data. Kantar reports that Android had a 50% share of sales in the U.S., 79% in Canada, 84% in Latin America and 86% in Spain.”
Brian Pitz is ranked 1319 of 2367 analysts with a 49% success rate and 0% average return over the S&P 500 (.INX). While Brian Pitz’s performance summary is not impressive, Brian’s previous recommendations regarding Google Inc (GOOG) resulted in +8.4% return.
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