Credit Suisse Says Google's Quarter was "Uneventful" Remains Focused on the "Big Picture"

Credit Suisse analyst Stephen Ju believes Google's quarter was "uneventful" and although he reduced his estimates, the price target only fell to $722 from $723 while he maintained his Outperform rating. In the quarter, strength in Google Play revenue offset weaker than expected growth in the traditional Site and Network businesses. The big story in the quarter is paid click growth which slowed by nearly a full percentage point from last quarter to 17%. Ju believes that in addition to the company's "relevancy enhancements" paid click growth also suffered from the increasing shift to mobile devices which is moderating. This can be seen in the slowing CPC declines. CPC had been declining on Google Network sites at a low double digit rate and this decline slowed to -4% from -13% quarter over quarter. Rather than getting bogged down in the minutiae of one or two internal metrics, Ju points to total revenue dollars and revenue growth which remain healthy. As the company continues to diversify its top line, this appears to be capture the bigger picture better than paid clicks or CPC. In addition to the slowing paid clicks, foreign exchange also acted as a headwind in the quarter and took one percentage point of growth off the table. Backing out the FX impact, top line growth would have been 21% instead of 20%. Overall, Ju believes that the potential near term positive catalysts such as increasing budget allocations to PLA, a pricing convergence between mobile and desktop inventory and monetizing Youtube outweigh the slowing growth in the core business.