The print and social media is concentrated with news of patent clashes between tech giants, failed apps, and botched IPOs. The hottest news these days is about tech and web, and the hottest stock ratings are given to bigwigs of the technology sector. Following the trend, Baird Equity Research has drawn a comparative analysis of the four big internet giants, Google Inc (NASDAQ:GOOG), Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY). The basic theme for pooling these companies together is the latest boom in mobile diversification and cloud technologies.
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The report raises the price targets for all three, except Facebook Inc (NASDAQ:FB). The expectation is that these companies will benefit from the healthy trend of online spending during Q3, which was undeterred by events like the Olympics and euro crisis. Moreover, the share price on the Internet index has increased handsomely, as theInternet index is up 8.5% over the past three months vs. 11% for the S&P 500 according to the report. The research likes large cap Internet companies because of the pull they have on consumers, which is unaffected by market direction. Additionally these companies have more resources at hand to comfortably diversify into mobile platforms.
Mobile Search is Rising
The analysis contests the view that Google’s negative search pricing trend is attributable to macro and competitive pressures on search, it believes that a more plausible reason is an increasing mix in query and click volumes from smartphones and tablets. Baird’s own metrics provide Search Engine Marketing (SEM) data that indicates a rise in both mobile search pricing and volume. Google Inc (NASDAQ:GOOG) reported that 25 percent of paid search budgets were spent on mobile, which is up from 10 percent in 2011. Mobile paid picks cover an increasing volume of all paid clicks. CPC (cost per clicks) prices are increasing on mobile, but the CPC on smartphones is still 50 percent of desktop’s, and tablet CPC is 88 percent of desktop’s.
Google’s Target Valuation
The report sees the Motorola acquisition, search advertising, and e-commerce and mobile growth as drivers of performance. The search engine is unshakeable in its market share, as reported by ComScore. The price target of $850 is based on these healthy trends that will show in Q3 results, and the share price is up 29 percent. Baird estimates an EPS of $10.81 for Q3 2012, which is above the consensus of $10.65.
Amazon Profiting with Kindle
The analysis expects growth in core retail, enterprise services, and advertising. The revenue estimate for 2013 is $80.5 billion, which will be driven by more sales of Kindle tablets (25-30 million devices this year, 30-35 million units in 2013). The Electronics and General Merchandise sectors are expected to grow by 35 percent for Amazon.com, Inc. (NASDAQ:AMZN).
eBay Recovering from August slowdown
The analysis cites distraction by the Olympics for the slowdown in August, and observes that the growth has rebounded in September. eBay will also benefit from a strengthening euro. Baird thinks that eBay Inc (NASDAQ:EBAY) has the potential to recover market share, as it is well positioned in e-commerce and gains shares in payments. The increased EPS and revenue estimates are $0.53 and $3.40 billion.
Facebook in Mobile
Baird finds Facebook Inc (NASDAQ:FB)’s advent into mobile, along with Sponsored Stories and ads in the news feed as good news, but there is still a lot of ground to cover in the mobile platform. The analysis has reduced the short term earning estimates, but still expects the company to do well in the longer run. The 2013 revenue and EPS estimate is $6.3 billion and $0.63.