Expectations Up, Stock Still Low for Google
Although neither company's stock price is anywhere near 52-week highs, Merrill Lynch has raised its second quarter revenue and earnings per share estimates for Google based on "improvements to monetization from advertiser use of 'broad match' and an increase in the number [of] paid search results per commerce query."
Earnings per share estimates for Yahoo remained flat.
Google continues to get a "buy" rating and Yahoo continues to receive a "neutral."
Merrill Lynch raised its Q2 revenue estimate for Google from $1.58M to $1.64M, which is higher than the prevailing consensus of $1.62M. The report raises the second-quarter earnings estimate on Google to $2.18 per share from $2.10, excluding options expensing.
"We believe Google will maintain its advantages in search innovation and ability to sign affiliates through enhanced monetization (toolbar deals with Dell and Adobe) which should lead to further share gains in 2H06," wrote analyst Justin Post. "Google's above-industry revenue growth will continue to overshadow mounting expense pressures, in our view."
Post also slightly raised 2H06 revenues by $40M, but left 2H06 EPS unchanged on higher anticipated research and development spending; he said he expects Google to continue to invest a "meaningful" portion of upside.
The report also said to expect a solid Q2 for Yahoo, and analysts are encouraged that Yahoo has held its share of search queries steady at 28 percent in the United States. Net revenues are expected to stay at $1.14M, up 31 percent year over year.