Google Inc (GOOG): Why the Analysts Are Right on Their $1000 Price Target

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Whether you rely on analysts’ recommendations on how to play a stock or you take analysts’ thoughts with a grain of salt, there are times when their actions are worth taking into consideration.

A case can be made for following their recommendations now for Google Inc (NASDAQ:GOOG). Not only do a significant number of analysts have it marked as a buy, but there are almost a dozen that have $1,000 price targets for the stock. The only other stock within striking distance of $1,000 is Priceline.

Google Inc (GOOG)

Who likes Google?

Barclays Capital, Needham & Company and Cantor Fitzgerald were among the firms that recently increased their price targets for Google Inc (NASDAQ:GOOG). Their actions took place from May through last week. Barclays and Needham raised their price targets to $1,000, while Cantor Fitzgerald raised its target to $1,030. Evercore Partners went even further and raised its target to $1,050.

The other companies that have price targets of $1,000 or more include Sanford C. Bernstein, Robert Baird and Jefferies Group.

Enhanced campaigns

One of Google Inc (NASDAQ:GOOG)’s most recent efforts aimed at increasing ads on mobile devices is gaining steam, and it is another reason behind optimism that the stock will hit $1,000 sooner rather than later.

Launched earlier this year, the product was designed to help businesses more easily have their ads displayed on mobile devices. Called Enhanced Campaigns, analysts at Cantor Fitzgerald cited this effort as one of the reasons for its price target increase. Businesses that use Google’s older, so-called legacy, campaigns have until July 22 to upgrade to the enhanced campaigns. Observers point out that it can be pricier, but the benefits could make up that difference for businesses, especially for those that are small to medium sized.

That July 22 deadline falls about a week after Google Inc (NASDAQ:GOOG) releases its earnings report for the second quarter. It reports on July 15, and we should get an idea about how the enhanced campaigns are going then. Remember, Google derives more than 90% of its revenues from advertising.


Then there’s YouTube. Of all of Google Inc (NASDAQ:GOOG)’s acquisitions, this has turned out to be the most lucrative. Just how lucrative YouTube is remains  unclear because Google does not break out revenue figures for the video service.

No matter, that has not stopped Wall Street analysts from trying to figure it out. What seems to be clear is that much of YouTube’s success also stems from mobile. It is estimated that as much as $350 million of Google’s roughly $14 billion in sales last quarter came from revenues raised through mobile ads on YouTube.

Morgan Stanley estimates that YouTube’s gross revenues this year will be $4 billion, generating roughly $711 million of operating income. Morgan Stanley pegged the video service’s revenues at $20 billion and its operating income at $5 billion by 2020.

Not bad for a company bought for $1.65 billion seven years ago.

The competition

What Google Inc (NASDAQ:GOOG)’s YouTube offers is unrivaled by its chief competitor in the space – Yahoo! Inc. (NASDAQ:YHOO)

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