Google Inc (NASDAQ:GOOGL)’s massive rise in its pay-per-click rates in the recent quarter is not surprising, Scott Kessler points out, even though the company’s stock is very undervalued.
The comment was made by the S&P Capital IQ analyst in a discussion about Google Inc (NASDAQ:GOOGL) and fellow Silicon Valley giant Microsoft Corporation (NASDAQ:MSFT) with David Asman on Fox Business Network.
According to Kessler, the way to think about Google really is through the mobile lens and how this has been affecting the company over the last couple of years and how the future is going to hold.
Kessler points out that they at S&P Capital IQ have expected the cost of paid clicks continuing to rise. However, he also points out that cost-per-click, especially what advertisers are willing to pay with that mix of mobile, is also rising.
He also tells Asman that the 25% increase in pay-per-click is unsurprising and points out that it’s a much smaller number when the whole of Google Inc (NASDAQ:GOOGL)’s business is considered.
“That is largely consistent. And by the way, that is just on Google’s website. The aggregate paid clicks actually increased 13% and so really, that is kind of consistent with the trend that the company has developed over the last couple of years. I think a lot of folks are going to focus on the fact that Google seems to have delivered revenues and earnings per share below consensus estimates but I would point out that Google does not provide guidance and Google was adversely affected by foreign exchange by about 500 basis points,” Kessler explains.
Meanwhile, he also says that Google Inc (NASDAQ:GOOGL) is probably going to be examined by the fact that it didn’t have a lot of surprises seemingly in its release. Kessler also explains why S&P Capital IQ rates the company’s stock as a “Strong Buy”.
“The number one reason, I think, is people are paying more attention to news flow than they are in terms of results and possibilities. This is a stock that we think is very undervalued if you look at their core rate of growth. We see the valuation as very, very attractive especially if they can withstand some of these recent headwinds especially related to the European antitrust matter,” Kessler tells Asman.
Google was recently sued by the European Union for alleged antitrust behavior.
Boykin Curry’s Eagle Capital Management owned 774,750 Class A Google Inc (NASDAQ:GOOGL) stock by the end of the last quarter of last year.
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