Google shares hit a new 52-week high this morning — $596.13 — after Jefferies jacked its price target up to $695, which would represent 17% further gains.
Why so bullish? Jefferies analyst Youssef Squali says in a note this morning:
Rising CPCs Amid Strong Demand. Our European and US channel checks suggest that online advertising continues to improve, with 1) Oct/Nov being record months for many SEMs, with strong momentum into Dec., 2) over 65% of online ad budgets continue to go to Search, with Google claiming the lion’s share, and 3) Display is improving, with 2010 budgets looking to be up mid-single digits Y/Y for several large advertisers.
Positive Read-across from Other Ad-focused Names. Commentary out of YHOO, AOL and VCLK last week points to strengthening demand fromadvertisers. Yahoo! reported seeing sequential improvement in RPS (revenue per search) and CPMs in 4Q, while AOL was able to successfully raise prices on premium inventory with more to follow in 2010.
E-commerce Growth Positive for Online Advertising. Online sales are up 3%Y/Y holiday season to-date (Nov 1-Dec 6), supporting the prospect for a modestly positive growth in e-commerce this holiday season vs. a 3% decline last year. GOOG, with its ability to cost effectively drive traffic to e-tailers, stand to benefit disproportionately. Checks with agencies suggest double digit CPC increases in certain retail categories.
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