Stifel Nicolaus’s Jordan Rohan today cut his rating on Google (GOOG) shares to Hold from Buy, while cutting his estimates for 2012 and 2013 EPS, warning that the company’s intended $12.5 billion acquisition of Motorola Mobility (MMI), announced August 15th, could “distract senior management” and limit the company’s return of cash to shareholders, while failing to protect the “Android” device camp.
“From an investor’s point of view, large acquisitions change the free cash flow growth story that provided valuation support above $500,” writes Rohan, “as Google is not likely to return capital to shareholders.”
And then there’s Facebook:
With 30%+ of aggregate Internet minutes spent on Facebook, the Internet’s center of gravity is shifting from Google to Facebook. This is translating to a CMO-level push to keep growth in search budgets low in 2012, while shifting spend to social and display. Macro concerns help to reinforce that cautious view. Android’s emergence continues to be remarkable, but the monetization of mobile click inventory for Google remains challenging.
Rohan cut his 2012 revenue estimate slightly to $33.7 billion from $34.7 billion, and cut his EPS estimate to $40.01 per share from $41.60 per share. He also cut his 2013 revenue estimate by 5% to $38.8 billion, and cut his EPS estimate by $2 to $46.
Google shares this morning are down $7.93, or 1.6%, at $493.33.
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