Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) missed on both top and bottom lines when it reported earnings last week. However, Wedbush analysts say the search giant’s advertising revenue looks “fine,” so they are maintaining their Neutral rating and $600 per share price target on the company’s stock.

Google stock GOOG GOOGL

Why Google missed

In a report dated April 17, 2014, analysts Shyam Patil, James Dix and Andy Cheng said Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) posted overall first quarter earnings and revenue that were “modestly” below their estimates. They say this was due to lower revenue from the company’s licensing and other segment. They also say it was a surprise because the segment had been creating upside in past quarters.

However, Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) came out slightly ahead of their estimates in both net and gross ad revenue. They report that the company’s EBITDA margins were lower than estimates because of 31% higher operating expenditures. They were only estimating a 24% year over year increase. The analysts also note that the company’s management attributed the higher operating expenditures to one-time items in connection with mergers and acquisitions and legal fees. This caused earnings per share to be $6.27, which was lower than their estimate of $6.53 and consensus estimates of $6.44 per share.

Positive takeaways from Google’s earnings

The Wedbush team notes a couple of positives in Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG)’s earnings this time around. The company reported a 17% year over year increase in gross advertising revenue, which is consistent with the 17% growth in the previous quarter and just ahead of their estimate. They also note that while cost per click did decline 9% year over year, it was flat quarter over quarter and a bit better than their estimate of a 11% decline year over year and a slight improvement of a 2% decline quarter over quarter.

Other items in Google’s report

Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) also reported lower than expected gross revenue, which decelerated to 19% growth and lower than expected net revenue, which decelerated to 26% growth quarter over quarter. Revenue from the U.S. also decelerated to 14% growth year over year, while U.K. revenue decelerated to 11% growth.

While licensing and other revenue was also lower than expected, Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) management noted strength in apps, content and sales of its Chromecast device. Paid clicks also decelerated to 26% growth year over year and was slightly below their estimate of 29% growth. EBITDA margins were 49.5%, which was lower than their estimate of 51.8% and consensus estimates of 51.1%.

Because of these lower numbers, the Wedbush team cut their 2014 net revenue estimate to $51 billion from $52.8 billion. They also reduced their 2015 net revenue from $63 billion to $62 billion. Their earnings per share estimate for 2014 falls from $27.76 to $26.32, while their 2015 estimate declines from $32.36 to $30.67 per share.