Amidst a drop of $11.40, or 1.5%, in Google (GOOG) shares, to $764.20, following a downgrade by BMO Capital‘s Daniel Salmon to Market Perform, RBC Capital‘s Mark Mahaney appeared on CNBC to defend his Outperform rating on the shares and $840 price target.
“At around 16 times earnings, the valuation is not demanding,” Mahaney told CNBC’s Halftime Report.
In Mahaney’s view, the stock has risen in the last year as a bunch of “overhangs” have been removed, specifically worries about mobile use of the Web hurting the company’s “economics” in its advertising business. “We’ve been seeing cost-per-clicks and traffic acquisition costs working positively for Google, and that’s going to continue to help push the shares higher,” said Mahaney.
He was asked whether Google, which is up 8%, might be benefiting from a rotation of investor money out of Apple (AAPL) stock:
“I think those kinds of inflows have happened across a good number of tech stocks — Google, Amazon (AMZN), Yahoo! (YHOO) — they’ve all benefited from those Apple stories.”
But, he added, “The Google story still works on its own. This YouTube asset, it’s highly valuable as ad budgets move on line.”
Mahaney was also asked about Facebook (FB), on which he maintains an Outperform rating and a $32 price target. “I don’t see a valuation case above $38 for Facebook in the next twelve months, not unless they come up with some dramatic new revenue ideas.”
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