GOOG, No Means Yes Baby Part 1

by Julia Mezzanine Tranche

Analysts are apparently panting down the trail for some “hot Google action.” Our attention was piqued by reactions of leading sell-side analysts to Google (GOOG) CFO, George Reyes, at a recent Merrill Lynch investor conference.

Reyes initially commented that, Google is “getting to a point where the law of large numbers starts to take root…” He continued to say that “At the end of the day, growth will slow…” and that “We’re going to have to find other ways to monetize the business.”

The sell side responded with comments including:

“We don’t believe there is any new or faster slowdown in Google’s growth than what we have already modeled.”
-Safa Rashtchy at Piper Jaffray, who has an “outperform” on Google

“Our thesis, growth expectations, and implied value of $500 are unchanged.”
-Goldman Sachs’ Anthony Noto, who has an “outperform” rating on Google

“We believe comments made at a competitor’s conference this morning, by George Reyes, were likely not intended to reset investors’ expectations about growth prospects.”
-Oppenheimer’s Sasa Zorovic, who rates Google a “buy”

“I’d hit it.”
-Unnamed Analyst

Goldman Sachs’ Prescott R. Moncrief III upgraded Google to “Technically Legal” from “Legal.”

The general analyst sentiment abounds with Corporate Date Rape Logic:

GOOG, I know you want to take it slow, but I’ve had three shots of jagermeister, you look hot and I’m thinking that you and I have at least a couple more quarters of stellar growth. I’m talking 50-60% per quarter and a price target of $1400. I’ll tell you what — have a couple more sips of your Smirnoff Ice and we’ll try just the earnings tip — if it doesn’t feel right we’ll take your price target right back down.

Google responded to the above analysts with the following clarification in a written statement:

“…moreover, as we have stated in our SEC filings, our revenue growth rate has generally declined over time and we expect that it will continue to do so as a result of the difficulty of maintaining growth rates on a percentage basis as our revenues increase to higher levels.”

One Goldman Sachs analyst, who answered Pres’ phone insisted “He’s busy with Yahoo at the moment. Wait this isn’t his wife, is it?” but then replied:

“Off the record, it’s clear that Google’s revenue growth rate has not declined over time and I don’t think she will have any difficulty maintaining growth rates on a percentage basis even as their revenues increase. My target price of $950 stands.”

Stay Tuned: We interview Prescott R. Moncrief III in Part 3.

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