Google seen best placed for growth as it
transitions to mobile
Google Inc is the best placed of any company to benefit from the shift to mobile, increased local advertising and wearable’s, analysts said after the search giant posted its 18th straight quarter of 20 per cent-plus revenue growth.
At least seven brokerages raised their target price on the stock on Friday by as much as $75, to a high of $700.
Google shares were set to open about 4 per cent higher at just over $600.
The company, which is also set to benefit from the so-called "internet of things", said on Thursday that second-quarter revenue rose 22 per cent to $15.96 billion, beating the average analyst estimate of $15.61 billion.
Growth was driven by the company's core search business, YouTube and product-listing ads, which combined to drive three times as much mobile traffic for merchants compared with last year, Jefferies analysts wrote in a note.
Brokerage Jefferies maintained its "buy" rating and $700 price target on the stock.
Of the 46 analysts covering Google, 36 have a "buy" or a higher rating on the stock and 10 have a "hold". There are no "sell" ratings, according to Star Mine data.
Google earns most of its revenue from advt.
The number of "paid clicks" by consumers on ads serviced by Google increased 25 per cent year-on-year in the quarter.
However, the average price of the ads declined 6 per cent as ad rates on mobile phones are typically cheaper than traditional online ads because of their smaller screens.
"Google is successfully transitioning its business from PC to mobile, and is arguably in a more favourable position in mobile than it was in PC, which should eventually be reflected in a higher multiple," Deutsche Bank analyst Ross Sandler wrote in a client note.
Google also owns Android, the world's most-used mobile software, and YouTube, the most popular video-streaming service.
Other online companies such as Facebook Inc. and Twitter Inc. are also revamping their advertising businesses to take advantage of the shift to mobile devices.
But Google has established unusually deep competitive "moats" around its business through scale, aggressive product innovation and substantial investment, RBC Capital Markets analysts wrote in a research note.
Google's capital investment budget has topped $17 billion over the past five years, and the company has spent about $13 billion on research, according to analysts.
The company is also spending big to push into new markets with innovations such as wearable computers, ultra-high-speed internet access and home automation - the "internet of things."
Google shares were trading at $604.33 before the bell, after closing at $580.82 on Thursday.
Up to Thursday's close, the stock had risen 26 per cent in the past year. The stock hit an adjusted life high of $615.03 in February.
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