Google Inc (NASDAQ:GOOG) releases its fourth quarter earnings report tomorrow, and Jefferies analysts are pretty bullish on the company. Their estimates are actually ahead of Wall Street’s, and they have increased their price target to $1,300 from $1,150 per share ahead of tomorrow’s report. They maintained their Buy rating on the stock.
Estimating Google’s results
Analyst Brian Pitz and his team said trends for the holiday quarter look good for Google Inc (NASDAQ:GOOG). They particularly are expecting strength in revenues for Google Sites and Licensing and Other lines. They’re expecting an increase of 28% in paid clicks, which they believe will be driven by mobile and Product Listing Ad clicks. However, they expect to see a decline of about 10% year over year in cost per click.
They’re modeling $14.1 billion in net revenue excluding traffic acquisition costs. That’s compared to Wall Street estimates of $13.5 billion. They’re expecting EBITDA of $7 billion, compared to consensus of $6 billion. They’re looking for non-GAAP earnings per share of $13.67 for the quarter, compared to Wall Street estimates of $12.25 per share.
Google’s holiday numbers look strong
The reason the Jefferies team is so bullish on Google Inc (NASDAQ:GOOG) is because of holiday data from the search giant’s advertising partners. They said digital marketing firms Kenshoo, ChannelAdvisor, RKG and IgnitionOne have all published data showing a meaningful increase in Product Listing Ads by online retailers. They said those reports confirm the findings of their proprietary study on PLAs, which was done in December. Kenshoo alone, which they say was the number one advertiser in their study, reported a 138% year over year increase in PLA spending by online retailers during the holiday shopping season.
The Jefferies team also said Google Inc (NASDAQ:GOOG)’s fourth quarter traffic trends also look good, according to comScore data. Also they note 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.
Google has a P/E of over 30, even though they face more patent lawsuits than any other American company. Its not so much that they are facing so many, but they have established a pattern of losing them, stock analysts ignore them and none have a sell rating on Google. These lawsuits are not insignificant, the Vringo settlement they lost yesterday over Adwords, gives Vringo 6.5% of Adwords revenue, Google’s
crown jewel and the source of over 90% of Google’s revenue, that’s significant. This is but the tip of the iceberg. These patent lawsuit loses are measured in billions of dollars, unlike Google’s anti-trust and privacy lawsuit loses, that have limits, patent violation loses don’t have a cap. Google is starting to look like a pump and dump, I wish I had the money and balls to short the stock, but I think the entire market is overvalued and don’t own Google or any of their competitors, because the market may be rigged and I have no logical way to tell which way any will go.