Thursday, March 27, 2008

Google (NASDAQ:GOOG): Buy Google here (for a bounce)

Banc of America is about the only firm defending Google (NASDAQ:GOOG) here following yesterday's comScore data.

Firm notes comScore's paid click report indicates GOOG's US paid clicks (core site) grew 3% Y/Y, from roughly flat and 25% Y/Y growth in Jan '08 and Q4, respectively. While GOOG's Feb paid click data does little to calm investor fears of a slowdown in GOOG's core business, they believe most of the deceleration is due to the continuing quality initiatives by the company itself, which should drive significant upside longer-term. Moreover, they caution investors against reading too much into comScore numbers as they have historically been a bit noisy (but directional nonetheless).

Paid clicks are a function of the number of searches, coverage (% of searches with an ad) and click-through rates (paid clicks per search with an ad). In Feb, GOOG witnessed healthy query growth of 30% Y/Y (vs. 39% in Jan).

While GOOG's ad coverage initiatives are painful in the near term, BofA believes they are necessary to drive sustained revenue growth over the long term.

Reits Buy and $700 tgt.

Notablecalls: BofA's Brian Pitz is right - GOOG's a buy. Guys, comScore data didn't bring any surprises. We had several firms (Piper, RBC - both influential analysts on GOOG) come out ahead of yday'd data saying it's likely going to be bad. Yet, we have the stock down almost 20pts pre mkt bc Mr. Amazon-to-$800 Blodget said the stock should be down.

The fact is the stock's already in bottoming process, down 40% from the highs. comScore data is partly worse than expected bc of GOOG's own doing.

Buy GOOG here. Buy it for the bounce.

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