Google Inc (GOOG) PT Lifted To $1,030 On Higher Estimates


Cantor Fitzgerald in their recently issued report has reiterated their BUY rating on Google Inc (NASDAQ:GOOG), the firm has also raised their Price Target for GOOG to $1,030 on higher estimates, reflecting increasing adoption of Enhanced Campaigns (EC) and strong growth in display.

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Google Inc (NASDAQ:GOOG) remains at the forefront of innovation while making great strides in mobile and display.

Google Inc (GOOG) PT Lifted To $1,030 On Higher Estimates

Positive early signs from EC migration emerging:

With the July 22 deadline looming, over 2M ad campaigns have already been migrated to EC since its February 2013 announcement (vs. 1.5M in April), and the pace of migration is accelerating. Google Inc (NASDAQ:GOOG)’s SVP of Ads/Commerce recently stated that early adopters were seeing better conversion rates while saving time on campaign management. ChannelAdvisor also noted that a subset of clients that migrated to EC saw a ~10% lift in revenue, driven by mobile.

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Google AdWords:

EC is the biggest change to Google Inc (NASDAQ:GOOG) AdWords’ UI in over 10 years, with a potentially significant P&L impact. EC allows advertisers to target consumers with ads based on context such as location, device type, and time of day in a single campaign vs. multiple campaigns segmented by device. Advertisers get powerful new bidding tools, smarter ads & extensions, and advanced reports.

With EC streamlining PC, tablet and smartphone bid management, and with conversion rates seemingly improving, analysts believe overall bid demand will increase across all buckets. As such, the research firm is raising its paid click growth estimate to 19% in FY:13 and 16% in FY:14, up from +17% and +13%, respectively. While greater mobile mix may have a dampening effect on overall CPCs short-term, higher bid density across devices should drive CPCs higher, over time.

Google’s YouTube monetization:

YouTube ad videos increased an impressive 78% Y/Y to 2.3B in April, implying that ~16% of total videos carry a video ad vs. 7.2% a year ago. Further, YouTube reported reaching 1B monthly users in late March, illustrating the platform’s massive reach and importance as a growing solution for brand advertisers. Cantor Fitzgerald estimate Google Inc (NASDAQ:GOOG)’s total display revenue (gross) in FY:13 at ~$6.8B, or ~12% of overall core Google revenue.

The research firm is increasing its FY 2013 revenues/EBITDA and EPS to $46.4B/$21.9B/$45.70 from $45.7B/$21.6B/$45.18, reflecting better traction with both EC and display.

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