Trading on Google (GOOG) ahead of their earnings announcement has been tricky. But with a $750 target, AmTech can’t quit being bullish now. The firm is cautious but gives three key points why GOOG is still a great Buy:
We look at GOOG as having three call options: 1) Display, 2) Video and 3) Mobile. Each opportunity is very large, but monetization is not yet tangible. Display is probably the most near-term opportunity and Mobile is probably the largest.
Development of international regions is a more tangible near-term opportunity. If GOOG’s other dominant markets were monetized like the U.S. , our analysis suggests this would result in 50% higher EPS in 2007. At the rate of the U.K. , earnings might have been 100% higher.
We think the operating margin will begin to rebound in 2H after a three-year period of decline. Net new hires (excluding DoubleClick) have declined 44% in the last two quarters from the trailing period. We are looking for net new hires in the 850-1,000 range with a solid top-line to give confidence to our 2H margin thesis.
AmTech reiterates BUY on Google (GOOG), target $750.
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