Two Fridays ago, shares in Google surged by as much as 15.7%. In just one day, some $63 billion was added to the company’s market value. This is believed to have been as a result of strong growth in revenues from mobile ads. This surge also caused the market to feel more confident in YouTube, which had become slightly unstable after Facebook announced they would start offering video.
Google has just reported the fact that its revenue and profits are better than expected. This is the first time this has happened in six quarters. As a result, the Nasdaq composite index went to a record intraday high. The surge was so big that the added value to the company was more than the combined market capitalization of LinkedIn Corp. and Twitter Inc. put together.
After Apple Inc., Google is the most valuable company in the world at present. After the stock prices soared, a single share was valued at $696. This means the total value for the web search giant currently stands at around $466 billion.
No less than 27 different brokerages raised their target prices on the Google stock by as much as $150. This means stocks were selling for $800 in some cases. It is believed that one factor that contributed to this is the fact that Ruth Porat, the new Chief Financial Officer, has emphasized disciplined spending. The rise in value is so significant that it could actually be catching up with Apple. Apple is worth around $740 billion and Google is now worth $545 billion. Porat’s fantastic work was highlighted by FBN Securities analyst Shebly Seyrafi.
She (Porat) is known to be tough as nails when it comes to expense management… A lot of investors are comforted by the fact that her first quarter as CFO, reporting, she is delivering.
The opportunity to earn a further $17 billion through video ads could be realized by 2017. And, despite the efforts of Facebook to take over the video world, it seems that YouTube is still the most likely to benefit from this opportunity. According to Google, YouTube watch time is up by 60% in the second quarter of 2015. Additionally, no cable network in this country using mobile alone was able to attract more viewers in the age category of 18 to 49.
Both Facebook and Google are working very hard to convince big companies to use online videos as a form of marketing. However, YouTube already has an edge, because its monetization platform for videos is much more mature. The content that it attracts is also generally of much better quality.
There is also the fact that the gap between desktop and mobile for CPC (cost per click) is closing. CPC is essentially how much an online ad actually costs. It is also believed that mobile CPCs will very quickly become bigger and more profitable than desktop CPCs.
There were some concerns when CPC revenue for Google fell by 11% in the first quarter. However, this may be due to YouTube TrueView ads, where the payment is only made if a user actually watches the entire advertisement. Additionally, the advertising revenue for Google rose to $16.02 million, which is an 11% rise and there was an 18% increase in the number of paid clicks. This was also highlighted by Mark Mahaney, RBC Analyst.
This growth has steadily held in the mid-to-high teens since at least Q1:13. Such consistency is a rarity, especially for a behemoth business…
The stock is covered by 48 different analysts. Thirty-eight of these have at least a ‘buy’ rating. Ten others have a ‘hold’ rating. The target for median price is currently at $672.