Merrill Lynch bullish on Google growth
Stock brokerage raises second-quarter outlook for search giant while maintaining a "neutral" for Yahoo.
The brokerage maintained its "buy" rating on Google and its "neutral" rating on Yahoo.
Merrill Lynch raised its estimates for Google based on strong search query trends and currency benefits. The brokerage also expects second-quarter advertising revenue growth for Google to continue to be significantly higher than its peers, including Yahoo and Microsoft.
In a research note, Merrill Lynch said it expects Google to continue to remain competitive for distribution partners and potentially gain search share over the next couple quarters, helped by toolbar deals with Dell and Adobe Systems.
Subsequently, the brokerage raised its earnings-per-share estimate for Google for the second quarter to $2.18 from $2.10, excluding stock option expenses. It raised its revenue estimate to $1.64 billion from $1.59 billion.
However, the brokerage left estimates unchanged for Yahoo, with net revenue at $1.15 billion and earnings per share at 11 cents, which includes stock option expenses.
Although it expects a strong second quarter from Yahoo, Merrill Lynch believes that the stock could remain range-bound after the quarter based on its view that the results are being priced into the stock.
Merrill Lynch said it does not expect Yahoo to raise guidance for the remainder of the year based on expected caution heading into the slower third quarter and a new product launch in the fourth quarter.