Several firms comment on Google (NASDAQ:GOOG) after the co released strong Q1 results last night:
- Stifel notes Google reported particularly strong results relative to that which was embedded in its share price. Even related to firm's estimates, the company beat revenue by 2% and EBITDA by 4%. Google was able to grow ex-TAC revenue by 14% sequentially and only grow its cash operating expenses by 7%, reversing the operating deleverage which began to occur in 4Q06. The company spent $600 million in capital expenditures justifying the theory that management continues to build the infrastructure to support the world's largest technology company.
Google may be a growth company but, when incoporating its public market valuation, they believe it is a value stock. The company reported ex-TAC revenue of 67% or 2.5x the industry and 6x the rate of #2 Yahoo!. Google controls distribution on the Internet at 65% of global search query share and its market share seems to grow each and every month. Google continues to have significant untapped opportunity in areas such as mobile, video, checkout, radio, and TV, among others. The business trades for 25x forward earnings despite being the recipient of the vast majority of the incremental growth on the Internet today. Firm continues to believe this is a must-own stock and they would be aggressive buyers of the shares against their $585 target, which amounts to 31x cash earnings or 85% of the rate of three-year growth expectations (2007-2009).
- JP Morgan notes they are pleased by Google's strong domestic performance. US revenues were up 48%, and $20M higher than firm's estimate, and the growth rate slowdown of 320 bps was much better than the 460 bps they were expecting. JPM believes market share gains and monetization gains contributed to the strong growth, and expect these trends to continue.
Google's 1Q EBITDA margin of 63.4% was ahead of JPM's 62.8% estimate and up 130 bps Q/Q. In light of continued heavy investments in capex, they are pleased with the margin expansion, which was driven by lower than expected RandD and better than expected gross margins.
Based on Google's 1Q07 performance, they are raising 2Q07 net revenue, EBITDA, and EPS estimates to $2.719B, $1.673B, and $3.55 from $2.651B, $1.643B, and $3.49, respectively. At the same time, they are raising F07 net revenue estimate to $11.41B from $11.27B, EBITDA estimate to $7.04B from $6.93B, and EPS estimate to $15.06 from $14.75
Maintains Overweight rating. Google trades at 31.3x F07 pro forma EPS estimate of $15.06, compared to its peers at 45.0x. Given that Google is growing significantly faster, they believe it deserves at least a valuation in line with peers, and thus maintain Overweight rating.
- Goldman Sachs says they expect Google's shares to move higher given 1Q2007 results that serve as a strong base for better-than-expected revenue and profit growth in 2007. They
believe that better margins and absolute EBITDA yoy growth of 61% versus consensus expectations of 55% growth should increase investor confidence in Google's ability to drive improving FCF growth and returns. First-quarter results reinforce firm's outlook and view on valuation and reflect Google's ability to outpace the search industry overall.They continue to see 20%-plus upside to their year-end price target of $620.
Notablecalls: Another surprise by GOOG! Well, not quite. Note that over the past year the co has on average managed to beat EPS by 11%. That exactly the number we saw last night. Of course, most of the market participants did not expect another beat of this magnitude, especially in light of YHOO's results. Hence, the sharp rally in after hours. While there are some signs of slight deceleration in growth rates, it's nothing compared to what we have seen at YHOO or EBAY. Plus, the stock trades at a discount to these two. So, in some sense, Stifel's right - GOOG's a value stock. I think there will be an upward bias in GOOG stock over the next week or so, helped by positive analyst chatter.
- Stifel notes Google reported particularly strong results relative to that which was embedded in its share price. Even related to firm's estimates, the company beat revenue by 2% and EBITDA by 4%. Google was able to grow ex-TAC revenue by 14% sequentially and only grow its cash operating expenses by 7%, reversing the operating deleverage which began to occur in 4Q06. The company spent $600 million in capital expenditures justifying the theory that management continues to build the infrastructure to support the world's largest technology company.
Google may be a growth company but, when incoporating its public market valuation, they believe it is a value stock. The company reported ex-TAC revenue of 67% or 2.5x the industry and 6x the rate of #2 Yahoo!. Google controls distribution on the Internet at 65% of global search query share and its market share seems to grow each and every month. Google continues to have significant untapped opportunity in areas such as mobile, video, checkout, radio, and TV, among others. The business trades for 25x forward earnings despite being the recipient of the vast majority of the incremental growth on the Internet today. Firm continues to believe this is a must-own stock and they would be aggressive buyers of the shares against their $585 target, which amounts to 31x cash earnings or 85% of the rate of three-year growth expectations (2007-2009).
- JP Morgan notes they are pleased by Google's strong domestic performance. US revenues were up 48%, and $20M higher than firm's estimate, and the growth rate slowdown of 320 bps was much better than the 460 bps they were expecting. JPM believes market share gains and monetization gains contributed to the strong growth, and expect these trends to continue.
Google's 1Q EBITDA margin of 63.4% was ahead of JPM's 62.8% estimate and up 130 bps Q/Q. In light of continued heavy investments in capex, they are pleased with the margin expansion, which was driven by lower than expected RandD and better than expected gross margins.
Based on Google's 1Q07 performance, they are raising 2Q07 net revenue, EBITDA, and EPS estimates to $2.719B, $1.673B, and $3.55 from $2.651B, $1.643B, and $3.49, respectively. At the same time, they are raising F07 net revenue estimate to $11.41B from $11.27B, EBITDA estimate to $7.04B from $6.93B, and EPS estimate to $15.06 from $14.75
Maintains Overweight rating. Google trades at 31.3x F07 pro forma EPS estimate of $15.06, compared to its peers at 45.0x. Given that Google is growing significantly faster, they believe it deserves at least a valuation in line with peers, and thus maintain Overweight rating.
- Goldman Sachs says they expect Google's shares to move higher given 1Q2007 results that serve as a strong base for better-than-expected revenue and profit growth in 2007. They
believe that better margins and absolute EBITDA yoy growth of 61% versus consensus expectations of 55% growth should increase investor confidence in Google's ability to drive improving FCF growth and returns. First-quarter results reinforce firm's outlook and view on valuation and reflect Google's ability to outpace the search industry overall.They continue to see 20%-plus upside to their year-end price target of $620.
Notablecalls: Another surprise by GOOG! Well, not quite. Note that over the past year the co has on average managed to beat EPS by 11%. That exactly the number we saw last night. Of course, most of the market participants did not expect another beat of this magnitude, especially in light of YHOO's results. Hence, the sharp rally in after hours. While there are some signs of slight deceleration in growth rates, it's nothing compared to what we have seen at YHOO or EBAY. Plus, the stock trades at a discount to these two. So, in some sense, Stifel's right - GOOG's a value stock. I think there will be an upward bias in GOOG stock over the next week or so, helped by positive analyst chatter.
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