Stifel Turns Bearish On Google, Downgrades To Hold

Scott Devitt of Stifel downgraded shares of Google GOOG GOOGL to Hold from Buy as the company's growth prospects stem from lower margin businesses and that the “best days” for shares may be behind it. “Google is in the early to mid stages of a core business maturation,” Devitt wrote. “The company continues to find growth outside of search, but in structurally lower-margin business segment such as Google Play and YouTube.” According to Devitt, Google's efforts to move into vertical search businesses such as Travel, Local and eCommerce will be met with rising competition from other large-cap companies like Amazon.com. AMZN The analyst adds that even if Google is successful in moving in to vertical search businesses, there may not be much room left for growth as only 30 percent of U.S. site visits come from organic search. Devitt questions of we are entering a “new era” for Internet stocks as Google's unquestionable leader status is being challenged by companies like Facebook FB who continues to take market share of ad dollars. The analyst suggests the possibility that Facebook will take 28 percent of incremental global digital ad dollars in fiscal 2014 (versus 22 percent in 2013) compared to 55 percent for Google. As such, Devitt states that shares of Google are unlikely to see significant upside or multiple expansion but at the same time shares are not likely to decline significantly.