RBC’s Jordan Rohan weighs in on the Google calamity, arguing that Comscore unit growth fears are overblown. The stock’s cheap now, he says, February spending has picked up after a weak January, and even if Google blows the quarter, the risk/reward looks excellent:
Net: We believe that investors’ fear over weak paid-click data from
Comscore is overblown. Our scenario analysis suggests even if Google
misses 1Q consensus EPS 3% and 2009 estimates are lowered by 15%,
shares are currently trading at 21x. Mid-quarter checks indicate
January was weaker than prior years, but total spend has picked up in February.
While the market is solely focused on volume,
revenue-per-search improvements may mitigate volume declines. Also,
Europe is seasonally strongest in 1Q, and March is the most
significant contributor, hence it may be too early to call for the
worst-case scenario. Our scenario analysis suggests favourable
risk/reward with 6% downside and 50% upside potential from here. Our
rating is Outperform and our price target is $675.
Jordan also views Comscore as being statistically irrelevant, but, thankfully, he’s not basing his call on that.
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