Morgan Stanley Comments on AVG Technologies' Google Contract Extension

Morgan Stanley has published a research report on AVG Technologies

that commented on the temporary Google

search agreement has been extended. In the report, Morgan Stanley wrote, "While AVG's temporary extension of its search agreement with Google isn't the closure we hoped for, the delay in renewal is largely due to timing around approvals and we believe the parties are close to finalizing a long-term contract—which will lift a key overhang on the stock. AVG provides a high quality and fast growing stream of search traffic (3.1B searches in 1H12), which is highly valuable to Google and positions AVG well in the renewal negotiations. Mgmt is focused on signing agreements with additional search providers—in addition to Google—to diversify its revenue stream, which should also help the multiple. Q3 should be solid, with mgmt expecting results in line to above their guidance and at 5x EV/CY13 FCF, a multiple usually reserved for broken stories, we remain buyers given AVG's 25%+ uFCF growth." Morgan Stanley maintained its Overweight rating on AVG Technologies, which closed Wednesday at $33.46.