Goldman Sachs removed Google (Nasdaq: GOOG) from their Conviction Buy List, but maintained their Buy rating and $680 6-month price target. The firm cited recent underperformance following in-line 1Q results.It's interesting that Goldman Sachs removed GOOG from the Conviction Buy List but maintained a $680 price target which is a 28% increase from the current $531 price ($528 after hours) within 6-months. If that expected price action doesn't warrant buying with conviction, then Goldman Sachs has some very high expectations for their market moving Conviction Buy recommendations. This alone makes the current share price an interesting entry point. It aligns with great valuations of 16x forward earnings and an impressive PEG of 1.00.
The firm still thinks Google can sustain a mid-teens revenuegrowth rate for the next 3-5 years. They said shares are attractive at 16x their 2011 EPS/FCF.
But wait, what has caused the massive 2 week decline of over 65 points? They beat earnings expectations which seemed like the stock could march up toward the $680 price target. However, market pros believe the decline was caused by the decision to add staff, acquire additional companies and develop products outside the realm of Internet search advertising. Now, it has dropped to a key resistance level. At $530, the stock has just crossed the 200 day moving average. Investors that rely on technical analysis understand this is a key inflection point which may cause the stock to climb or continue to decline.
Which ever trajectory the stock continues in the near future, it could be worth looking at. Holding at this level could be powerful, however, the lower it drops the more attractive on valuation it becomes.
Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas.
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