Google's Outlook Enchants Analysts; Q2 Rev Up 22%, Ad Prices Down 6%

Google GOOGL gained more than 4 percent Friday after reporting a 22 percent increase in second-quarter revenue.

The company missed earnings expectations but analysts were broadly impressed by its second-quarter performance and outlook.

Deutsche Bank analyst Ross Sandler called Google is the "only mega-cap tech company growing north of 20 percent" annually and said second-quarter results show it "successfully transitioning to mobile from PCs."

Sandler called it a "top pick Buy" and raised his target to $645 from $625.

A New York Times story Thursday noted that Google doesn't break out mobile advertising revenue from desktop revenue, and that the price advertisers pay Google each time an ad is clicked on dropped 6 percent from a year earlier. The company has seen a two-year trend toward declining ad prices.

But Barclays analyst Paul Vogel said he doesn't "share the concern about costs per click that many have." Flat pricing for the category compared with the previous quarter and a six percent price decline, slowing from a year earlier drop, are "a modest positive," Vogel said, reiterating and Over Weight rating and $60 target.

SunTrust's Robert Peck said that the company's number of paid clicks grew 25 percent in the second quarter while flat margins demonstrate effective cost controls.

Peck likes the company's reinvestment of returns "for future growth," which presumably includes its recent acquisition of drone maker Titan Aerospace, Skybox imaging, a satellite service, and its development of a self-driving car.

Peck raised his price target to $725, from $680, and reiterated a Buy rating.

But Jefferies analyst Brian Pitz, with a target of $700, said that going forward, "the ecosystem looks unbeatable" with layers of products including search, maps, YouTube, Google glasses and self-driving cars.

Like Sandler, Pitz called it a "top pick Buy," noting that Google posted its fastest growth in two years during the recent quarter.