Google’s stock has fallen 14% since January 4, when it was at a two-year high of $626.75. That provides investors a good opportunity to pick up some Google stock on the cheap, says Citi analyst Mark Mahaney.
In a note this week, he says Google’s long term prospects remain strong. The company is well positioned to take advantage of the growth that’s due for Internet advertising.
Here’s the four big reasons Mahaney thinks investors should be buyers of Google’s stock. (All in his words):
- Update #1: Potential Impact Of New Search Ad Products — We believe Google’s four recently introduced Paid Search Ad Products (Sitelinks, Product Advertising, Local/Map Advertising, and Comparison Ads) not only reflect continued — and necessary — innovation at Google but also provide further evidence of Search’s growth runway and the potential for Paid Click growth reacceleration – a key investor focus – as well as further monetization growth.
- Update #2: GOOG’s Growing Display Ad Opportunity — Display Advertising has become a major priority for Google over the past year, and we believe market characteristics (a highly fragmented, inefficiently served $20B+ global market) and GOOG’s positioning (1MM+ Websites Content Network) create a large opportunity. We est. $1B – $2B in ’11 Gross Network Display Ad Rev for GOOG.
- Update #3: Increased Traction For GOOG’s YouTube Property — YT continues to grow at a remarkably robust rate, despite its size. With over 480MM worldwide unique users, YT is still growing its visitors, page views, and streams at consistent 30%+ levels. And YT’s monetization continues to ramp as well, with increased Ad Coverage (54% of Top 100 Videos) and Ad Frequency, in addition to new Ad Formats. We see the potential for $1B in ’11 Gross YouTube Revenue for Google.
- Update #4: GOOG’s Attractive Cash-Adjusted Valuation — Adjusting for $24B in GOOG Cash & Mkt. Sec., we calculate GOOG’s P/E to be 17X, approx. in-line with NASDAQ’s forward multiple. Given GOOG’s growth outlook, competitive moats, biz model & management strength, we view this relative valuation as attractive.
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