Like the girl in the movie who turned out to be cute once she took her glasses off, Google (NSDQ: GOOG) is feeling loved. Following last night's report, shares are trading up nearly 17 percent (about what they did after hours), and analysts all of the sudden have only nice things to say about it. Bernstein's Jeff Lindsay, who has stayed solidly bullish, titled his report Google: The Silence Of The Cynics. Although management downplayed, to some extent, the effect of ad quality improvements, Lindsay estimates that revenue per US paid click grew by 12 percent sequentially and 27 percent year-over-year. Some highlights from other analysts, who haven't dropped their cynicism completely:
-- Ross Sandler, RBC: "US growth of 30% y/y was well-ahead of overly pessimistic expectations (including ours at +28%), but showed deceleration from 4Q07 levels. Most impressively, Google is showing cost controls while maintaining growth, with margins stable for three quarters in a row at 58% However, over the intermediate-term (next 2 quarters) we still believe that Google could face some economic headwinds in the US and UK, which could create more volatility in shares. "
-- Doug Anmuth, Lehman: "Overall, Google posted 1Q08 results very much in-line with initial expectations coming out of 4Q earnings 3 months ago before more material concerns set in around paid clicks." Basically, comScore (NSDQ: SCOR) helped set Google up for a beat. Without some help from the firm, it would have been an in-line quarter. Something else to watch out for: "Google's PF EPS of $4.84 was significantly higher than consensus of $4.52, but approximately 22 cents of the 32 cents beat was attributable to a lower tax rate and lower share count." And even though paid clicks came in well ahead of comScore, they are slowing no matter how you slice it: "20% growth does represent a deceleration from 30% Y/Y growth in 4Q and given the company noted no material impact from macro-effects in the quarter, a continuation of this deceleration moving forward could cause concern."
-- Mark May, Needham: "The Q1 results were better than we had feared heading into the quarter given intra-quarter datapoints, and they do reinforce our positive longer term view on Google and the online advertising sector in general."
-- Mark Mahaney, Citi: Says it's time to forget about all the "noise" of Q1 and focus on five reasons to be bullish about Google's business: "1. Secular growth in online advertising; 2. Clear market share gainer in search; 3. The beginning of what could finally be stable margins?; 4. A dramatically undermonetized but very large asset (YouTube) that is finally being monetized; & 5. Material option value with Mobile and Display/DoubleClick advertising"
By Joseph Weisenthal