Advertising changes lowers target price on Google stocks
Google made changes to its advertising system in the hope that this would increase the revenue coming in from mobile users. However, the changes did not reflect well on the internet giant's second-quarter results. As a result, Google shares opened 4% lower Friday.
The price targets for the stock were also reduced. Several brokerages including Raymond James, Deutsche Bank, JP Morgan, and BMO Capital Markets dropped their price targets by as much as US$40. This step factored in the reductions in margins. These margin reductions were due to Google's investment in non-core businesses. A note from BMO analysts to its clients stated, "Investors should assume continued margin erosion as new investments will never match the margins of the core search business."
However, other brokerages were of a different opinion. "Enhanced Campaigns is the biggest change in the Google ad platform to date and thus it will likely take 6-12 months for the positive impact to show in the numbers," wrote Piper Jaffray, an analyst at Gene Munster, in a note.