Google to gain from growing mobile focus: analysts

Analysts cheered Google Inc’s quarterly results and set a target of as much as $720 on the stock - suggesting a near 30 percent rise from current levels - and said the Internet search giant could emerge a “top mobile play.” On Thursday, Google reported a 26-percent rise in third-quarter earnings - ahead of market estimates - helped by growing online ad market and sharper research focus. Accelerating revenue growth in Google’s international business, particularly from emerging markets, and its mobile business contributed to the 28-percent increase in paid click growth, according to analysts.

Riding strong

BofA Merrill Lynch analysts see Google’s third-quarter results signaling a positive trend for the sector and said they continue to expect a strong third quarter for eCommerce companies. They maintained a positive stance on eBay Inc and Amazon.com Inc. BofA Merrill Lynch maintained a “buy” rating on Google’s stock, but lowered their price target to $720 from $740. Analysts at J.P. Morgan Securities, however, raised their price target on the stock to $705 from $685, and believe mobile was the biggest factor in Google’s sharp acceleration in paid clicks growth. The revenue run rate for Google’s mobile business is more than $2.5 billion, a significant leap from $1 billion just a year ago. It is plowing money into its fast-growing mobile business which competes with iPhone maker Apple Inc. The strong mobile revenue highlights the importance of Google’s Android mobile software - already the world’s most-used smartphone platform - and supports the rationale for its Motorola Mobility Holdings deal, the analysts said.

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In August, Google announced plans to acquire Motorola Mobility for $12.5 billion. The deal will give Google access to one of the largest patent libraries in the wireless industry as well as hardware manufacturing operations that will allow it to develop its own line of smartphones. The increasing usage of tablets in a manner more similar to PCs than phones is helping drive incremental queries and paid clicks to Google, even if they are coming at a lower price for now, JP Morgan analysts, who rate the stock “overweight,” said in a note to clients. “We expect this trend to continue, and for Google to be the primary beneficiary as it likely has 90 percent plus share of mobile search - even higher than on the desktop,” they added. Google’s Frankfurt-listed shares were trading up 8 percent on Friday. On Thursday, Google shares closed at $558.9 on Nasdaq. 

Reuters