BGC’s Colin Gillis today raised his rating on shares of Google (GOOG) to Buy from Hold, and raised his price target $10 to $650, in advance of the company’s Q3 report tomorrow afternoon, based on rising prices for the company’s keyword search advertising.
Google has been able to increase prices per click all year, he points out, proof the company knows how to “capture the economics associated with improving conversions.”
Gillis expects 12% growth in click pricing in Q3, the same as Q2, and thinks it will continue above 10% this quarter.
Gillis is modeling $7.5 billion in revenue for Q3, and $9.05 per share in profit. That is above the consensus estimate of $7.21 billion and $8.74 per share.
“Shares of Google tend to work better in the second half of the year,” writes Gillis, “as search activity and click pricing both accelerate tied to holiday spending.” He emphasizes that he’s not “embracing” Google’s proposed purchase of Motorola Mobility (MMI), nor the company’s increased spending, merely the immediate outlook for the business.
Google shares today are up $6.82, or 1.2%, at $550.
Previously: Google Q3: Street Estimates Reasonable Based On Search Data, October 11th, 2011.
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