GOOG Google: CIBC comments on GOOG/DELL deal; firm lowers their '06 and '07 EPS estimates & tgt (348.19 ) -Update-
CIBC expects the GOOG/DELL deal to be slightly higher than breakeven for Google, due to the large bounty paid to Dell. They think the near-term benefits of this page are protection of Google's search market share, higher traffic and higher top-line revenues. Longer term, they believe the deal will help Google create additional monetization opportunities in the desktop software market. Despite possible long-term benefits, they believe Google's aggressive stance in securing Dell and other distribution deals will lower margins, increasing sales expense by about 250 bp in '06. Firm is lowering their '06 and '07 EPS estimates to $8.73 (consensus $8.83) and $11.55 (consensus $11.96), and their price target to $500 from $520.
Yet another tiny downgrade, 520 to 500. The message here is clear: we're not going to prop this thing up forever, but we don't want to screw our clients by giving a realistic price target and maybe causing a panic. Yet.