Trefis Members Expect Slow Growth in Google Search Market Share

by Trefis Team
-1.75%
Downside
557
Market
547
Trefis
GOOG
Google
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Google (NASDAQ:GOOG) competes with Yahoo (NASDAQ:YHOO), AOL (NYSE:AOL), and Microsoft (NASDAQ:MSFT) in the search advertising market. We currently have a Trefis price estimate of $683 for Google’s stock, about 41% above the current market price of $486.

Trefis members have created forecasts for two key drivers of Google’s stock over the last week: (1) Google Search Market Share and (2) Search EBITDA Profit Margin. The members’ forecast suggest that Google Search Market Share and EBITDA Profit Margin will trend below the Trefis forecast. Their projections indicate a combined downside of 7% for Google’s stock.

We estimate that Search Ads constitute 72% of the $683 Trefis price estimate for Google’s stock. Hence the stock is quite sensitive to (1) Google Search Market Share and (2) Search EBITDA Profit Margin. Below are charts showing recent estimates created by Trefis members for the two drivers in detail.

1. Google Search Market Share

The average of forecasts for Google Search Market Share created by Trefis members indicated a projected increase from 66% in 2010 to nearly 69% by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from 67% in 2010 to about 73% by the end of the Trefis forecast period. The member estimates imply a downside of 4% to the Trefis price estimate for Google’s stock. In the past, Google Search Market Share has increased from 29% in 2003 to 65% in 2009.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Google’s stock to Google Search Market Share.

Our complete analysis for Google Search Market Share is here.

2. Search EBITDA Profit Margin

The average of forecasts for Search EBITDA Profit Margin created by Trefis members indicated a projected decrease from 57% in 2010 to nearly 56% by the end of the Trefis forecast period.  In comparison, we expect Search EBITDA Profit Margin to be flat at around 58.5% over the Trefis forecast period. The member estimates imply a downside of 3% to the Trefis price estimate for Google’s stock. In the past, Search EBITDA Profit Margin has decreased from about 67% in 2003 to 59.5% in 2009.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Google’s stock to Search EBITDA Profit Margin.

Our complete analysis for Google’s stock is here.

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