Shares of Google Inc on Wednesday fell below $300 for the first time since late 2005 after analysts lowered their estimates on the Internet search giant, citing a weak advertising market.
The shares were down 6.5 percent at $291.19 in afternoon Nasdaq trade. The stock is off more than 50 percent this year.
The global economic slowdown is impacting many companies' advertising budgets, hurting Google's main business, paid search ads.
Citigroup analyst Mark Mahaney said in a note that the online advertising growth rate is likely to slow in the fourth quarter for top e-commerce companies such as eBay Inc and Amazon.com Inc. The slowdown will likely impact Google, he said.
A company once considered nearly invulnerable to a downturn in the economy. Following recent estimate cuts from Barlcays and Goldman Sachs, the stock today was hit with three more negative research notes from the Street.
- Citigroup’s Mark Mahaney today cut his Q4 EPS estimate for the company to $5.03, from $5.17. He also lowered 2009 to $21.18 from $22.25, and 2010 to $24.82, from $25.68. His price target on the stock drops to $450, from $480. He says that “search marketers almost universally expect Q4 to be the weakest they have ever experienced.” Mahaney maintains a Buy rating on the stock, but also notes that there are no catalysts to point to, and that “unprecedented macro trumps all.”
- Collins Stewart’s Sandeep Aggarwal likewise trimmed his 2008 EPS estimate to $19.50 from $19.60; he cuts 2009 to $22.92 from $23.43. He cut his target to $465, from $525, but maintains a Buy rating. The cuts reflect “further weakening retail and advertising environment and the resulting [cost per click] pressure dilemma.”
- Stanford Group’s Clayton Moran also cut numbers; he now sees ‘08 EPS of $19.38, down from $19.89, with 2009 down to $18.51, from $20.60. His price target drops to $390, from $430. He blames - no surprise here - “rapid deterioration in the global economy.” He now sees zero growth in overall Internet advertising in 2009.
Amazon (AMZN), eBay (EBAY), Expedia (EXPE) and Priceline (PCLIN)–indicates that they’ll be making dramatic cuts in the amount they spend on Web advertising this quarter (see chart below).
Click the image to enlarge
“These companies are staring into what could be an ecommerce abyss and appropriately cutting back on their marketing spend, certainly including their spend with Google,” Mahaney writes.
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Sources :
- MoneyWeb: Google shares below $300 for first time since 2005, 13 November 2008 03:28
Tech Trader Daily: Google: One Recession To Crush Them All, November 12, 2008, 10:34 am
Media Memo: Yet More Google Estimate Cuts: Big Online Marketers Slashing Ad Spending, November 12, 2008
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