Google Shares 'Cheap', SunTrust Reiterates

In a report published Thursday, SunTrust Robinson Humphrey analyst Robert Peck reiterated a Buy rating and $680 price target on Google (NASDAQ: GOOG) following disappointing first quarter profits.Google posted first quarter results on Wednesday, April 16. The company reported $15.42 billion in revenue, a 19 percent year-over-year growth. Network revenue (Ad Sense) was slightly below expectations at $3.4 billion. Google properties revenue (Ad Words) was up 21 percent at $10.47 billion, in-line with expectations.Operating income from continuing operations grew to $3.65 billion, up approximately 3.5 percent. Google reported lower traffic acquisition costs of 23.3 percent in first quarter 2014 compared with 25 percent in 2013. A 26 percent gain in paid clicks and a loss of 9 percent for the cost per click were below expectations.Robert Peck noted that the current price of Google shares is “cheap."The analyst commented, “Shares trade at 8x 2015 EV/EBITDA, and 17x 2015 P/E vs. forecasted growth rates 21% and 22%, respectively. We view this as inexpensive give the company's premium search and PC related assets (Chrome, Play), leadership in mobile (Android), video (YouTube), and ad tech (DoubleClick, AdMob, AdExchange) and longer-term optionality (eCommerce, Enterprise, Infrastructure).”SunTrust emphasized Google's strong financials and “attractive” valuation. Peck remarked that the company continues to dominate search share and the core foundation remains solid. The analyst looks forward to Google's continued innovation.Peck wrote, “We think the company has been a pioneer in not only navigating the changing landscape, but catalyzing the changes itself. Google continues to invest in big ideas with large TAMs and while the payoffs of these investments is unknown we remain optimistic based on previous success and our understanding of new areas being explored (i.e., bioengineering, Glass and wearables, automotive data, etc).”Shares of Google closed at $556.54 on Wednesday.