Google Now Worth $700, Credit Suisse's Stephen Ju Says

In a report published Friday, Credit Suisse analyst Stephen Ju maintained an Outperform rating on Google Inc GOOGL GOOG, while raising the price target from $690 to $700. Google is poised to benefit from the expanded scale of businesses of YouTube and Google Play. The combined revenue contribution from the two has risen from 4 percent of Google's total revenues in 2010 to 15 percent in 2015 and is expected to reach 24 percent by 2020. "Following extensive checks with industry sources, we have recalibrated our model to assume a steeper gross profit dollar growth trajectory for YouTube as improved monetization via TrueView is set to drive net revenue (ex-CAC) growth in excess of bandwidth costs which we believe is more tethered to the growth of consumer engagement," analyst Stephen Ju mentioned. In the report Credit Suisse noted, "Google is on the cusp of significantly surpassing revenue guarantees offered to its telco distribution partners and is hence also set to show greater operating and free cash flow contribution." The FY15 net revenue estimate has been reduced by 500bps to reflect the recent weakness resulting from the company's "exposure to regions impacted by FX." The adjusted EPS estimate for FY15 has been reduced from $26.40 to $25.88.