Citigroup: Google's Exposure To Apple's Safari 'Priced In'

Mark May of Citigroup commented in a note on Thursday that Google's GOOG potential loss of being the default search agreement on Apple's AAPL mobile Safari browser represents a “a near-term and quantifiable risk.” “We estimate that Google's total world-wide search revenue will be $51 billion in 2014, of which $12 billion or 24 percent will come from mobile devices,” May wrote. “Of this, we estimate that $7.2 billion or 60 percent of total mobile search revenue in 2014 will come from its default search deal with Apple's Safari mobile browser.” May notes that Google's search revenue stream is expected to grow 48 percent year over year this year and represent 21 percent of the incremental revenue growth and contribute $5.0 billion in net revenue. However, May does note that it is likely Safari would include an option for Safari users to manually switch the default search engine back to Google and that 20 percent of iPhone and iPad users will do so. As such, the analyst estimates the ultimate impact to Google will be $7.5 billion in gross revenue and $4.8 billion in net revenue in 2015. Bottom line, according to May, “Google shares are now pricing in the aforementioned risks – at least the one that we can reasonably quantity, which is the Safari search risk.” Shares of Google are Buy rated with a $652 price target.