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A photo of the Google Inc. logo is shown on a computer screen in San Francisco, California July 16, 2009.
Credit: Reuters/Robert Galbraith
Fri Oct 14, 2011 10:59am EDT
(Reuters) - Shares of Google Inc jumped over 7 percent on Friday, a day after the internet search giant said robust growth at its mobile business and a strong emerging market lifted its third quarter, allaying worries that a slowing Europe was hurting business.
The strong mobile revenue underscores the importance of Google's Android mobile software -- already the world's most-used smartphone platform -- and supports the rationale for its Motorola Mobility Holdings deal, analysts said.
In August, Google said it will acquire Motorola Mobility for $12.5 billion. The deal will give Google access to one of the largest patent libraries in the wireless industry as well as hardware manufacturing operations that will allow it to develop its own line of smartphones. [nL3E7JF1LD]
The company is plowing money into its fast-growing mobile business which competes with iPhone-maker Apple. Google's Android mobile software now powers 190 million devices, up from 135 million in mid-July.
"While Google is large and well-followed, we still see the company as an underappreciated mobile play," BofA Merrill Lynch analyst Justin Post said in a research note.
"We see Google as a 15 percent grower, warranting a premium valuation to the large cap technology sector."
However, Post -- an analyst with a five-star rating, according to Starmine data for the accuracy of his earnings estimates on the company -- cut his price target to $720 from $740 citing the complex Motorola buy as a near-term overhang.
Some investors worry that a move to build its own phones could jeopardize support for Google's free Android mobile software from other phone manufacturers such as Samsung Electronics and HTC Corp
Many other brokerages raised their price targets on the company, some by as much as 10 percent.
Collins Stewart raised its price target on the stock to $795 from $725 -- 42 percent higher than its current levels.
The increasing usage of tablets in a manner more similar to PCs than phones is driving more queries and paid clicks to Google, JP Morgan said in a note.
"We expect this trend to continue, and for Google to be the primary beneficiary as it likely has 90 percent plus share of mobile search -- even higher than on the desktop," it said.
According to Thomson Reuters StarMine data, 13 analysts rate Google a "strong buy," 20 rate the stock a "buy" and four others rate it a "hold," with a mean price target of $716.17.
Google's Frankfurt-listed shares were trading up 7 percent, while its Nasdaq-listed stock rose to $599.60 in morning trade.
(Reporting by Sayantani Ghosh, Tenzin Pema and Rachana Khanzode in Bangalore; Editing by Roshni Menon and Don Sebastian)
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