Topeka Capital Reiterates Buy On Google Ahead Of 2Q14 Earnings Report


In a research note released this morning, Topeka Capital analyst Victor Anthony reiterated a Buy rating on Google (GOOG) with a $657 price target. This comes ahead of Google’s 2Q14 earnings report, scheduled for next Thursday (7/17) after the market close.

The following bullets contain some key points from that report:

  • We are estimating total company revenue of $12.30B (+22% YoY, ex- Motorola), Adj.
  • According to RKG, paid search spending growth on Google from their clients accelerated to 24% YoY in 2Q, from 17% YoY in 1Q14, and 19% YoY in 4Q13. Paid clicks growth was 13% YoY in 2Q compared to 10% YoY in 1Q14 and 15% YoY in 4Q13, and CPC growth was 10% YoY in 2Q compared to 6.5% YoY in 1Q14 and 3% YoY in 4Q13. Overall, CPCs on PLAs are up about 43%. These trends suggest that Google’s fundamentals strengthened and that paid search as an ad category continues to resonate with advertisers, even while facing increasing competition from social media, which is garnering an increasing share of direct response budgets.
  • Google’s multiple investments (Fiber, home monitoring and automation (IOT), transportation, remote Internet access, robotics, weareables, satellites, Chrome devices may not generate a return today, but serve to create longer-term value by strengthening Google’s ecosystem, in our view. However, we would like direct commentary from management on how they see these investments driving longer-term shareholder value.

According to TipRanks.com, which measures analysts and bloggers success rate based on how their calls perform, analyst Victor Anthony currently has a one-year average return of 16.8% and a 67% success rate. Anthony has a 13.5 average return when recommending GOOG, and is ranked #114 out of 3211 analysts.

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