Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) released its second quarter results this week, and analysts from multiple firms are weighing in, as usual. JPMorgan analysts increased their price target for the search giant, while the Nomura team granted Google a “clean bill of health.”
JPMorgan raises Google’s price target
In a report dated July 18, 2014, JPMorgan analyst Doug Anmuth and his team reiterated their Overweight rating and bumped up their price target from $645 to $670 per share. They note that the search giant saw acceleration across all three of its segments. Net revenue was $12.7 billion, slightly higher than estimates.
Google Sites shows strength
The JPMorgan team said they were especially encouraged by strength in Google’s Sites segment. They said Google’s new metrics indicate that cost per click growth in its Sites segment bottomed out in the fourth quarter of 2013, as the declines were smaller in the first half of this year.
The analysts noted “many cross-currents” in Google’s numbers, but they say the inflection in cost per click growth for Sites that began in the previous quarter might suggest more upcoming “material improvements” in Google’s mobile monetization, or at least, that the price gap between mobile and desktop is dragging less on the Sites business.
They say one of the biggest parts of their thesis about Google entering this year was that mobile would become a tailwind as pricing there increased and the share of mobile clicks increased. They see the company’s second quarter results as being a sign that “the early stages” are happening.
Google’s updates “generally positive:” Nomura
In a report also dated July 18, 2014, Nomura analysts Anthony DiClemente and Rom Zember said they were happy that their previous channel checks correlated with the increase in ad spending levels. They say pricing growth was actually better than they expected because cost per click did not fall as much as they expected. The result was revenue that beat their estimates. They maintained their Buy rating and $675 per share price target on Google.
The Nomura team notes that Google’s expenses grew a little higher than expected and that the company’s headcount was higher than expected. The company has hired more than 2,000 new employees in the last three months. However, the search giant’s capital expenditures rate is slowing down and was in line with estimates at $2.6 billion, a 64% increase year over year. They note that this is the third quarter of deceleration in capital expenditures growth, which they believe will alleviate some of the worries about Google’s high spending on moonshot projects.
Another bright area pointed out by the Nomura team was the positive tone about YouTube. It launched Google Preferred Video in April at BrandCast. They think the guaranteed ratings, better measurement, targeting ability and favorable cost per impression pricing will pull brand marketers over to YouTube.
