Why Google Inc (GOOGL) Has 40% Upside Potential: Mark Mahaney

Google Inc (NASDAQ:GOOGL) may have missed its expected earnings for the recently-ended quarter but the company’s shares are still good stocks to buy, Mark Mahaney of RBC Capital Markets said in an interview on CNBC.  Google Inc (NASDAQ:GOOGL) announced on Thursday that it earned $2.81 billion, or $4.09 per share, for the third quarter of the year, a decline from a profit of $2.97 billion, or $4.38 per share, in the same quarter a year ago.

Nonetheless, this should not cause a stir in the investing community, Mahaney said, as the company still has a good price-earnings ratio.

“[…] There was an earnings miss but it was really due to the tax rate being higher than expected. Google continues as kind of the internet advertising juggernaut. At 15 times earnings, we think it’s a great value play in the internet,” he said.

Furthermore, he said that while the core search business market share of the company is declining, margins for the company are stabilizing and new revenue streams have been opened by the internet giant.

“[…] That revenue growth will slow down but at a very glacial pace. $66 billion revenue run rate [and] the company growing at 19%, that’s rare air,” he said.

Moreover, properties and ventures such as YouTube, enterprise services, Google Play – and even long term plays like Google’s interest in cars, wearables and the like – will help the company in the long run, Mahaney added.

There may be questions about the company like its stock compensation program and its mass hiring, but RBC Capital Markets believes the company has invested in key growth areas they need to be in, he said at a later part of the interview. The internet giant has declining profit, but it is in the ballpark of what RBC Capital Markets believe is reasonable for a company of this size and stature.

Google Inc (NASDAQ:GOOGL) is “very well set-up” and its stock “very attractively priced,” he said.

RBC Capital Markets has an “Outperform” rating on Google Inc (NASDAQ:GOOGL)’s stock with a price target of $725.

Google Inc (NASDAQ:GOOGL) investors includes Stanley Druckenmiller’s Duquesne Capital which reported 259,610 Class A shares in the company by June 30.