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Bernstein raises Google target to $600

2009.05.09

Sanford C. Bernstein boosted its price target on Google Inc (GOOG.O) by 30 pct to $600, saying improving economic conditions would rapidly translate into higher revenue per click for the company's paid search advertising business.

Text-based ads, which appear alongside Google's search results, account for a major share of Google's revenue, which totaled $5.51 billion in the first quarter, say analysts.

 

"Although revenue per click (RPC) weakness may persist through the second quarter and possibly into the third quarter, we think the trend will reverse by the fourth quarter and restore Google's revenue growth to 14 percent year over year," analyst Jeffery Lindsay said in a note to clients.

 

Lindsay, who has an "outperform" rating on the stock, said recovery in the fourth quarter could help raise revenue for the year by 7 percent.

 

Analysts are expecting Google's revenue to grow by 4 percent in 2009, according to Reuters Estimates.

 

Lindsay said paid search will recover almost in real time as the economy improves since it does not involve formal contracts and is sold in a real-time electronic auction for search terms.

 

The analyst said though paid click growth was strong, revenue per click was hurt in the last two quarters and fell for the first time ever in the fourth quarter.

 

Paid clicks -- a measure of how often Google gets paid for advertisements alongside its Web search results -- rose 17 percent in the first quarter from a year earlier.

 

But revenue per click appeared to have declined as advertisers reduced the bids they make for keywords in Google's auction-based advertising system.

 

Shares of the company were up about a percent in trading before the bell. They had closed at $396.6 Thursday on Nasdaq. The stock has shed more than 31 percent in the past one year as investors were worried that the paid search business would face pricing pressures due to the worsening economy. (Reporting by Saumyadeb Chakrabarty in Bangalore; Editing by Anil D'Silva)

http://www.reuters.com/article/rbssSoftware/idUSBNG42796620090508

 

 

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