Analysts Praise Google's Q1 Margins, Revenue Growth

Google Inc GOOG GOOGL shares continued to gain Friday while analysts praised its recently improved profit margin and revenue growth.

Google posted first quarter earnings Thursday that were 0.45 percent short of expectations and the company's 12 percent revenue gain was also a whisker shy of the consensus.

Google traded recently at $577, up 3.5 percent, while its shares have gained nearly 8 percent this week.

Google investors want revenue growth, margin stabilization and cash back in the form of dividends and buybacks, according to RBC's Mark Mahaney.

"They got two out of three," said Mahaney, who tweaked his target up less than 2 percent to $640.

Google's net margin came in flat for the recent quarter "after imploding for three years," which Deutsche Bank's Ross Sandler said suggests cost discipline and "the rejiggering of some management roles."

Sandler maintains a Buy rating and $670 target.

The margin improvement suggests Google "could move to protect profitability and share price," according to SunTrust's Bob Peck who called and the bear thesis of unending aggressive spending by Google "too pessimistic."

Peck maintained a Buy rating Friday, as did JMP's Ronald V. Josey, with targets of $650 and $625, respectively.

Paid clicks grew 25 percent but cost per click fell 13 percent because of growth in the relatively cheap TrueView ads on YouTube.

Pacific Crest's Evan Wilson noted that Facebook Inc FB recently reported that cost per view for its video ads were also falling.

Video optimism "is going to be pushed out" relative to high expectations, according to Wilson, who maintained an Overweight rating and $675 target on Google.

But Jefferies Brian Pitz called YouTube "the big story," and said the platform is "the best positioned to benefit" as TV advertisers shift their budgets to online viewers.

"We see it as a $17 billion opportunity" within a few years, said Pitz, who maintained a Buy rating and $700 target.

Both Axiom's Victor Anthony and Webush's Shyam Patil both maintained Hold ratings on Google Friday.

Anthony cited the company's continued investments in "moonshots" which pressure margins, as well as heightened regulatory concerns in both Europe and the U.S.