Value Check: Is Google Really Worth $800? (GOOG)

For starters, this call is now looking for more than 60% upside if you look at the stock today.  The driving point behind the thesis seems to be mostly on the mobile internet representing a massive opportunity for Google.  Heath Terry noted, “We forecast Google’s mobile revenues growing from $2.5 billion in 2011 to $14 billion in 2015.

We wanted to consider what that translates to right now and it is substantial.  The report does accept some cannibalization from PC revenues.  Thomson Reuters has estimates of more than $27.6 billion in total revenues this year.  In short, the revenue contribution will be far more than the roughly 10% today.
More issues factored in are regulatory pressure, competition, and investment spending; but that growth driver is from search, mobile, display and local.  The report notes that 11-times 2012 earnings has these concerns more than priced in.  Some emerging revenue drivers are likely to come from payments, mapping, click to call, offers and location-based services.

Thomson Reuters has a consensus price target of roughly $700 on Google stock.  We checked Thomson Reuters and $800 is the “Street High Call” on Google.  The $485 handle today with a consensus 2012 target of almost $39.50 EPS in 2012 generates a consensus forward P/E multiple of about 12.2-times forward earnings.

Our own take outside of what Canaccord Genuity offers is rather simple here.  A 60% rise in the stock would make all of its multiples much more expensive than today, but how expensive is a stock when it trades this far under the S&P average?  We can’t exactly agree on every metric with the “Street High Call” because we are generally more conservative than that.  Still, it makes for a significant value case.

JON C. OGG