Google: Searching for Gains?

11/17/2014 7:00 am EST


Scott Kessler

Deputy Global Director & Industry Analyst, CFRA Research

Our latest featured stock is a global tech company whose stated mission is to organize the world’s information, explains S&P Capital IQ equity analyst Scott Kessler in S&P's The Outlook.

Google (GOOGL) has amassed, and maintains, what we believe is the Internet’s largest index of information, and makes most of it freely accessible and usable to anyone with online access.

Its brand is one of the most recognized in the world. The word Google has become synonymous with the Internet search category.

We believe this reflects GOOGL’s historically strong focus on the search segment and the company’s related market share leadership in many countries around the world, including the US.

We believe revenues will rise 11% in 2014 and 18% in 2015. We forecast non-GAAP EPS of $26.05 for 2014, $30.92 for 2015, and $36.23 for 2016, following $19.94 in 2012 and $21.95 in 2013.

We upgraded our opinion on GOOGL, which is the ticker for the Class A shares of the company, after the company reported third-quarter results in October and following notable year-to-date underperformance.

We see leading franchises, healthy growth, benefits from the pending sale of the Motorola smartphone and tablet unit, a strong and flexible balance sheet, and a compelling valuation.

Google carries S&P Capital IQ’s highest investment recommendation of 5-Stars or “strong buy” and our 12-month target price is $650.

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