Google shares tumble despite bright outlook
While the rate beat a Wall Street consensus of 64 percent growth, investors had built up expectations of a steeper rise in recent weeks, sending the stock down to about $487.
“Expectations for revenue got ahead of themselves ... and the company is also investing in the business as it should,” said Stifel Nicolaus analyst Scott Devitt. “For a short-term trader that could be viewed negatively. From a long-term investor standpoint, it’s all good.”
Devitt was one of at least eight analysts who raised their price targets for Google shares yesterday, including analysts at Goldman Sachs, Merrill Lynch, UBS, RBC Capital Markets and Prudential. Some of the price increases brought their view of Google shares closer to, or above, a $600 milestone mark.
“Google had a good quarter, but not the type of blowout needed to propel the stock higher, in our view,” wrote UBS analyst Benjamin Schachter in a research note. “Google continues to invest for the long-term, and while that may temper results in the near-term, we believe it is the right thing to do for the business.”
Schachter rates the share to a “buy” and raised his price target on the stock to $560 from $535.
The contradictory reactions stemmed from recent data showing Google had captured an even greater share of Internet search queries, boosting hopes it was also improving upon its ability to translate those queries into advertising dollars.
Google executives held out prospects for future growth boosted by a high rate of capital investment and new forays into advertising formats beyond the textual ads that appear in Internet searches.
Analysts said they expected those efforts would pay off.
“Sure they are maturing ... but I am very reluctant to consider 70 percent growth mature,” said Devitt. “Particularly when you have opportunities such as radio, mobile (search), TV and payment processing.”
