Stifel Nicolaus downgraded Google yesterday, reducing their earnings estimates on concerns that the company’s core business may be slowing and that it may end up drawn into the hardware business due to its acquisition of Motorola Mobility (MMI).
The brokerage believes “the strategic position of Google is weakening. The MMI acquisition could distract senior management, fail to protect Android, lead Google into intensely competitive hardware business and keep Google from returning capital to shareholders.” The report went on to say, “With 30%+ of aggregate Internet minutes spent on Facebook, the Internet’s centre of gravity is shifting from Google to Facebook. This is translating to a CMO-level push to keep growth in search budgets low in 2012, while shifting spending to social and display. Macro concerns help to reinforce that cautious view. Android’s emergence continues to be remarkable, but the monetization of mobile click inventory for Google remains challenging.”
The analyst cut his F12 revenue estimate to $33.7 billion from $34.7 billion and his earnings estimate to $40.01 per share from $41.60 per share. He also cut his 2013 revenue estimate to $38.8 billion, a 5% decrease, and his EPS estimate to $46 from $48.
Google (GOOG : NASDAQ : US$504.70), Net Change: 2.80, % Change: 0.56%, Volume: 4,491,331
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