Reuters: Technology News: Google shares rise as strong ad business eases macro fears

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Google shares rise as strong ad business eases macro fears Jul 20th 2012, 11:18 Fri Jul 20, 2012 7:18am EDT (Reuters) - Shares of Google Inc rose 3 percent in premarket trade on Friday after the company posted a healthy gain at its online advertising business, assuring the Street that it was performing well despite a slow economy. A slew of analysts reiterated their ratings and price targets on Google's stock, saying there were no real surprises and that the positives had offset the negatives in the quarter. "There is still material return on investment upside available to advertisers from search advertising, and that such upside will continue to fuel ongoing demand for search ads and revenue growth," Sanford C. Bernstein analyst Carlos Kirjner said in a note. Google's advertising rates have been pressured as consumers increasingly use smartphones to access mobile versions of the Web, but the concern was alleviated as overall clicks on Google's search ads jumped 42 percent in the second quarter. The success of Google's web browser, Chrome, will offset rising traffic acquisition costs (TAC), Barclays Capital analyst Anthony DiClemente said in a client note. TAC is the money paid by internet search companies to online firms that direct traffic to their websites. DiClemente is a five star-rated analyst for the accuracy of his earnings estimates on Google, according to Thomson Reuters StarMine data. Chrome users nearly doubled by the second quarter to 310 million. Benchmark Co, which has a "hold" rating on Google's stock, raised its price target by $10 to $625. NO WORD ON MOTOROLA The world's No.1 search engine, however, evaded questions about its plans for Motorola Mobility, which it recently bought for $12.5 billion, saying Google was yet to complete its homework on the various businesses. "Results were somewhat difficult to decipher with the consolidation of the Motorola Mobility acquisition," RBC Capital Markets analysts said. "Management did not outline a specific plan for the future of MMI as a part of Google, and so we anticipate that Street estimates for the combination could vary quite widely." Motorola reported an operating loss of $233 million in the second quarter on revenue of $1.25 billion. Barclays' DiClemente said Google had the ability to instill fiscal discipline for Motorola to limit the spending investors fear. Google also did not provide much details about its hardware business where margins are low and competition from the likes of Apple Inc and Samsung Electronics Co Ltd is fierce. Shares of the company, which closed at $593.06 on the Nasdaq on Thursday, rose to $609 in trading before the bell. The stock has dropped 11.5 percent since its touched a four-year high of $670.25 in January. (Reporting by Sayantani Ghosh in Bangalore; Editing by Saumyadeb Chakrabarty) Link this Share this Digg this Email Reprints

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