The two analysts said, "We were surprised by the reaction to the Merkle (RKG) and Kenshoo datapoints and our take on them last week, exspecially considering that we stressed in our note that these were only two datapoints with imperfect predictive power." The analysts highlighted that the datapoints do not include June data, and "depending on how they were applied could be interpreted as suggesting that 2Q16 search growth [...] is trending in-line with expectations (not below)."
Therefore, the two analysts concluded that the early reactions may be an over-reaction. They said, "We view these early datapoints as inconclusive. First, Kenshoo's historical correlation is quite low plus its 300 bps sequential deceleration is on a 300bps tougher comp. Second, while some investors are comparing the sequential deceleration in spend at both Merkle and Kenshoo to the consensus expectations for stable seq. growth for Google on a GAAP net revenue basis."
The brokerage believes YouTube Tracker does provide some reason for additional modest caution. However, that too appears reflected in forecasts.
"We continue to view earnings forecasts as achievable. Moreover, we would not discount Google's ability to continue to innovate and produce new growth drivers (e.g., expanded text ads, Google Maps, etc.)," the analysts concluded.
At Time Of Writing...
- Alphabet (GOOGL) was up 0.25 percent at $710.63.
- Alphabet (GOOG) was up 0.09 percent at $696.60.
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