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 Google's class A shares chalked up their largest single-day
percentage change in more than seven years on Friday.
The surge, which comes a day after it reported better-than-expected
profit for the first time in six quarters, sent the Nasdaq composite
index to a record intraday high.
The rise in Google's market value was more than the total market
capitalization of Caterpillar Inc <CAT.N>, the world's biggest
construction equipment maker.
Google's shares hit a record high of $703, valuing it at $471.50
billion and cementing its position as the world's second most
valuable company after Apple Inc <AAPL.O>.
At least 27 brokerages raised price targets on Google's stock, with
analysts also welcoming new Chief Financial Officer Ruth Porat's
emphasis on disciplined spending.
At the highest price target of $800, Google would be valued at $545
billion. Apple is valued at about $740 billion.
The energy brought to Google by Porat, who joined in May from
investment bank Morgan Stanley <MS.N>, is likely to drive the stock
in the short and medium term, analysts say.
"She is known to be tough as nails when it comes to expense
management ...," FBN Securities analyst Shebly Seyrafi said. "A lot
of investors are comforted by the fact that her first quarter as
CFO, reporting, she is delivering."
YOUTUBE CLICKS
Google said on Thursday that watch time for YouTube rose 60 percent
in the second quarter and the video service had more viewers aged
18-49 on mobile alone than any U.S. cable network.
Online video ads could be a $17 billion opportunity in the United
States alone by 2017, Jefferies & Co analysts said, and YouTube
looks best positioned to benefit.
Google and Facebook are trying to woo big companies to market
products via online videos.
But YouTube has an edge over Facebook as it has a more mature
monetization platform that seems to attract the best content, Piper
Jaffray analyst Gene Munster said.
Google's ad revenue rose 11 percent to $16.02 billion in the second
quarter. Paid clicks rose 18 percent.
"This growth has steadily held in the mid-to-high teens since at
least Q1:13," RBC analyst Mark Mahaney said. "Such consistency is a
rarity, especially for a behemoth business..."
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Google said the gap was closing between mobile and desktop "cost per
click" (CPC), or the average price of online ads. Mobile ads are
usually cheaper because of smaller screen space.
Mobile CPCs are likely to exceed desktop CPCs in the long term,
Munster said.
Google's CPCs fell 11 percent in the quarter, pressured by YouTube
TrueView ads, which are priced lower and paid for by advertisers
only when viewers don't skip them.
Of 48 analysts covering Google, 38 have "buy" or higher ratings,
while 10 rate it "hold." Their median price target is $672.
Giri Cherukuri, portfolio manager at OakBrook Investments LLC,
attributed Google's surge to management's comments during a
post-earnings conference call. Lisle, Illinois-based OakBrook owns
shares in Google.
"They (investors) liked the focus on expense control and openness
towards possible dividends and share buybacks," Cherukuri said,
adding that Google's comments on strength at Youtube and, in
particular, mobile viewing, likely translated into positive
sentiment for Facebook as well.
Facebook's shares rose as much as 5 percent to an all-time high of
$95.39 on Friday.
Up to Friday's close, Google shares had risen about 32 percent this
year. The stock trades at 19.7 times forward earnings, while
Facebook trades at 38.1 times.
(Additional reporting by Saqib Iqbal Ahmed in New York and Eileen
Soreng in Bengaluru; Editing by Kirti Pandey and Simon Jennings)
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