GOOG Earnings Thursday: Analyst forecast roundup

April 12, 2011, 6:16 PM UTC

Analysts are publishing their forecasts for Google’s Q1 2011 earnings.

Thursday’s earnings call will be the first under new CEO Larry Page and analysts are expecting to get some guidance on the direction of the company.  Overall the outlook is positive with expectations of Google (GOOG) beating guidance and the Street.

Interestingly, there isn’t much talk about the ITA purchase, which has now gotten Federal approval.

Here we go…

Justin Post at BofA Merrill Lynch has a high target of $750 with higher OpEx to keep EPS in check:

A chance to come out swinging, Google reports 4/14: While we don’t want to discount the Facebook, margin pressure and regulatory overhangs (which won’t go away after the Q), management comments on search strength (including mobile), leadership changes, and product pipeline could set a more positive tone for the stock.  We think the set up is positive over the next 6 months with negative sentiment (stock down 3% YTD), the potential for a backlog of product releases for the CEO Larry Page to announce, and our view that management does care about the stock price as an employee retention tool.

ThinkEquity’s  Aaron Kessler has a price target of $780 and is modeling $6.39B  revenues(up 26.2%Y/Y, 0.3%Q/Q), roughly in line with the Street’s $6.44B.

Based on our industry check as well as other industry data points, we remain comfortable with our 1Q Google net revenue estimates (up 26.2% Y/Y, 0.3%Q/Q). While we expect relatively in-line 1Q results for Google, we believe shares at 16x/14x our 2011/2012 PF EPS estimates or 14x/12x (ex cash)remain attractive vs. our mid-teens LT growth expectation. We reiterate our Buy rating and $780 price target (19x 2012E PF EPS)

Overall, our search checks indicated on average 15-20%Y/Y growth on a same client basis and down low single digits sequentially…Expect Aggressive Hiring and Pay Increases to Impact Margins

Jordan Rohan at Stifel Nicolaus has a target of $775 and sees Larry Page’s early moves (7 reports, rewarding social, CFO given expanded power) as positive but sees risks to investment:

The biggest risk to earnings, in our view, is the impact on margins of hiring practices. Other risks include competition, and the popularity of social/mobile media, which could draw Google users away from the directly-navigated search behavior today, and broad macroeconomic concerns

Gene Munster at Piper has a price target of $725 and says GOOG looks cheap but with risks that include competition, increasing traffic acquisition costs, loss of key partnerships, and slowing ad/search growth.

Shares of Google have not moved meaningfully since the company reported Q4 earnings. We believe the reason is that investors are uncertain of Google’s growth prospects in 2012 and beyond. While calling Google a value stock in the past has not worked out, we believe the current 14x multiple that GOOG trades at on FY12 consensus PF EPS of $40.09 appears cheap given expected growth of 18% in 2012.In terms of the upcoming quarter, we expect Google to report revenue in line with expectations of $6.32 billion, but believe there is a chance that there is downside to bottom line expectations of $8.13.

Trip Chowdhry from Global Equities Research has a lower price target of $650 with the following bullet point to consider:

  • Google search market share stable, query volume up, bid rates slightly up
  • “Radiation” Keyword  strong – $13 PPC; “Radiation” AdSense also Strong – may contribute to surprise
  • Search+ YouTube strong; Re-Marketing – but how will it perform with “Do Not Track Me” Regulation
  • Google Reorg is 2 years too late; but can the new organization deliver?

Mark S. Mahane at Citi has a target of $750 and views Long-Term Risk/Reward As “Reasonably Attractive”

We are looking for $6.31B in Net Revenue (up 25% Y/Y and down 1% Q/Q) and $7.90 in non-GAAP EPS – This compares with consensus expectations of $6.32B and $8.13.  Based on extensive intra-quarter channel checks and our model sensitivity work, we believe Street Q1 Revenue estimates are reasonable, although Street Q1 EPS estimates appear high-end aggressive, given clear company indications of a substantial headcount ramp and the previously announced 10% across the board compensation increase.

Kerry Rice at Wedbush has a price target of $750 and says that “Android could be as dominant in the smartphone market as in search.” More on that shortly.

We believe 1Q10 revenue and EPS  should exceed expectations given strength from international search and display. Our 1Q11 net revenue estimate is $6,376 million, which is modestly above consensus of $6,322 million and our pro foma EPS estimate of $8.17 is also modestly above consensus estimate of $8.13.  While we expect solid growth from U.S. search, we believe the upside could come from paid clicks and international geographies.  While U.S. search queries were seasonally weaker than we expected, we believe paid clicks were likely as strong as or stronger than in 1Q10 due to the success of Google Instant (Figure 1). We believe Google should report growth in paid clicks of at least 15% YoY (Figure 3). While Cost-per-Click (CPC) rates fell below our expectations, the decline was less than we expected (Figure 2). We believe the uptick in March resulted from an increase in CPC rates primarily from the Retail, Auto, and Finance verticals. We believe upside could come from international geographies, which according to our contacts surprised on the upside with significant YoY growth

Tune in Thursday at closing to get our instant analysis.

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