Some people in the investment community are projecting that Google Inc (NASDAQ:GOOG) could reach $1,000 per share by next year. Apple Inc. (NASDAQ:AAPL) had received the same speculation last year when it hit the $700 mark, and many expected it to become the first company with a trillion dollar market capitalization.
That never happened. Instead, the stock price of the iPhone and iPad maker went downhill, and it is currently trading around $423 a share as of this writing. On the contrary, some analysts are optimistic that Google Inc (NASDAQ:GOOG) will reach $1,000 over the long-term, citing that the search engine giant has a lot of room for growth. Google’s stock is currently trading around $780 per share.
Product diversity a plus
Is a $1,000 stock price attainable for Google? The answer is yes, because of the diversity of its products and services. Although Google generates a majority of its revenue from search and advertising, it offers a wide range of internet-related products and services such as the Android OS, Chrome OS, Google+, Google Inc (NASDAQ:GOOG) wallet, Google maps, Voice, YouTube, Google Play, Google Drive, Google TV etc. Its Motorola unit offers mobile wireless devices and other related products and services, as well as video entertainment services to consumers.
Majority of Google’s revenue is generated from advertising (92%), and the remaining 8% from Motorola Mobility. In 2012, the search engine giant reported a total of $50.17 billion in revenue, of which $46.03 billion was advertising revenue and $4.13 billion was from Motorola.
Its total advertising revenue was generated from Google Inc (NASDAQ:GOOG) sites (68%), Google Network Members websites (27%), and others. Google could generate more revenue from existing and future products.
On the other hand, Apple’s business is mainly manufacturing mobile devices. Although the iPhone and iPad maker dominates the mobile market, IDC’s latest analysis indicated that it will lose its leading position in the tablet market this year. At present,investors are concern about future prospects of Apple Inc. (NASDAQ:AAPL). As a result, the stock price of the company continues to plummet due to analyst downgrades.
Apple is no longer the favorite of hedge funds. Google Inc (NASDAQ:GOOG) is now the new darling of hedge funds and mutual funds because they consider its diversified products a great advantage, and it is the only technology company experiencing growth in all areas of the internet.
Goldman Sachs removed Apple Inc. (NASDAQ:AAPL) from its list of highly recommended stocks. Many are wondering if Apple is willing to produce a cheaper iPhone in order to compete in the emerging markets where consumers have lower income.
YouTube: Fastest growing billion dollar business
Wedbush analyst James Dix believes that YouTube is increasingly becoming a key growth driver for Google, and expects to generate growth from CPM-based sales. He also noted that the Ad Age top 100 brands have advertisements on YouTube. Elliot Turner, managing director of RGA Investment Advisors estimated that YouTube is worth $45.7 billion.
Once Google Inc (NASDAQ:GOOG) finds the best strategy to transform YouTube as one of the best marketing platforms for advertisers, it will be able to generate substantial revenue for the company. RBC analysts expect YouTube to generate $4 billion revenue this year.
Enhanced campaigns higher cost per click
Google reported in the fourth quarter of 2012 that the average cost per click (CPC), including ads placed on Google sites and Network Members sites, declined 6% from its average CPC in the same period a year earlier. However, the search engine giant reported that the average CPC rose 2% in the 4Q from 3Q last year.
Analysts believe that CPC will continue to increase through initiatives such as the upgraded Adwords search ad system called enhanced campaigns, which could help businesses boost ad campaigns and Google Inc (NASDAQ:GOOG)’s own profits.
CLSA analyst James Lee strongly believed that Google’s enhanced campaigns enables businesses to buy ad spots easily on mobile devices. According to him, the upgraded ad system increases the adoption of mobile search, which could take CPC higher and shorten the gap between mobile and desktop CPC. According to him, Google is in a “very good position in the multi-screen world where it can track its users.”