FBN Reiterates on Google, Commenting "The Bull Case Keeps Building"

In a report published Friday, FBN Securities analyst Shebly Seyrafi reiterated an Outperform rating on Google GOOG and raised the price target from $1,300.00 to $1,400.00 following revenue beat and the sale of Motorola Mobility. For the fourth quarter, Google reported $16.9 billion in consolidated revenue and NG EPS of $12.01. Net cash grew to $163.00 per share, or $55.5 billion. The company announced that they will start offering a dividend to new Class C shares with the ticker: “GOOG” on April 2. The prior Class A shares will have the ticker “GOOGL”. Seyrafi noted that “the bull case keeps building” for Google. The analyst noted that paid click growth accelerated 31% Y/Y, the expected increase in profitability with Google selling Motorola to Lenova, and the acceleration of rest of world (ROW) and Network segments. FBN noted that the $0.20 EPS miss last quarter was due to weak Motorola Mobility results. With the announcement of the sale of Motorola Mobility on January 29, Lenova will pay $2.91 billion consisting of $660 million cash, $750 million in Lenova stock and a 41.5 billion three-year promissory note. The analyst commented, “We applaud this move as GOOG benefits in many ways: 1.) GOOG's operating margin could benefit by as much as 5 percentage points as Motorola's roughly - 20% to -30% operating margin was countering GOOG standalone operating margin of ~34% resulting in a blended ~29% operating margin. Now, operating margin may head toward 33-34%; 2.) GOOG's relationship with Samsung, the #1 smartphone vendor with 31% unit share in CQ3 2013, may now improve as the relationship became strained after the GOOG/Motorola deal (Samsung responded by focusing a bit more on smartphones using its own Tizen OS); 3.) GOOG can still benefit by owning over 2,000 patents (only the phone business is being sold to Lenovo).” Shares of Google closed at $1,135.39 and are currently up 3.50% at $1,175.08.