RBC Capital Raises Google P.T. To $750 Post Impressive Q2 Performance, Mark Mahaney Weighs In

Following Google Inc GOOGL's second-quarter earnings beat, RBC Capital analyst Mark Mahaney raised his price target on the stock to $750 from $640. Mahaney was on CNBC recently to weigh in on the earnings and share his outlook for the stock.

Managing Costs Better: The Inflection Point

"The revenue growth was actually very consistent," Mhaaney began. "You have to adjust for foreign exchange and that was about 17-18 percent, it's been remarkably consistent for 3 years in a row for a $70 billion ad run rate business. So, that was kind of surprise number 1 that we have yet to see that kind of negative inflection point."

He continued, "But the second thing was the margins, for the first time in 5 years operating margins were actually up year-over-year and there is going to be a lot of hope and probably lots of expectations that this new CFO who has come in, Ruth Porat, is part of the drive behind managing costs better at the company than they have done it in the past. That was really the inflection point in the quarter."

P.T. Increase

Mahaney was asked his outlook for the stock going forward. He replied, "We continue to be buyers of the stock. We have a new price target, we literally just published a few minutes ago $750. Look, the stock is going to go through a rerating. The setup here is that both estimates and multiples can rise on the stock, it's one that's really somewhat underperformed over the last 12 to 18 months."

"People have been cautious about their lack of cost controls, people have been worried about the potential revenue growth, decelrataion, people want signs that some of that cash is going to be returned to shareholders and they really came through with all 3 of those things in the quarter," Mahaney concluded.