S&P Capital IQ Says 'A Lot Of People Have Forgotten About Some Of The Notable Risks' Related To Google

Scott Kessler, S&P Capital IQ analyst, downgraded Google Inc GOOGL to Hold from a Strong Buy last Friday after the company's shares jumped more than 15 percent on back of exceptional second-quarter results.

Kessler was on CNBC to explain the reasoning behind the downgrade.

Hold Is More Appropriate

"Look, we put out an update after we raised our target price on Friday," Kessler began. "$715 we thought was reasonable and next thing you knew the stock was in the $700s implying 2 percent upside."

"So, at that point we thought look a Hold is more appropriate and it does seem that a lot of people have forgotten about some of the notable risks we see related to Google and that's something that people need to be mindful of as well, especially after the gains this year."

The Stock Is Fully Valued

On Google's current valuation, Kessler said, "It is interesting to note that there was a lot of negativity across and around Wall Street related to Google and I don't know that things have completely flipped at this point, right? So, people are optimistic about YouTube, people are optimistic about mobile, people are optimistic about costs and expenses, people are optimistic about capital allocation. "

"But there [is] still lot of competition. I think, growth is going to be interesting and as we look out a couple of years from now and then think about what's going on from a legal and regulatory perspective at roughly 25 times our estimate for this year, we think, the stock is fully valued," Kessler concluded.