SAN FRANCISCO (AFX) -- Google Inc. shares rallied in pre-market trades Friday as Wall Street cheered the Internet search giant's 60% profit jump on its surging advertising business.
Mountain View, Calif.-based Google reported first-quarter net income of $592 million, or $1.95 a share, up from $369 million, or $1.29 a share, a year earlier. The results include stock-option costs and other expenses. Analysts expected Google to earn $1.75 a share.
Shares jumped 8.7% to $450.89 in pre-market trades. The stock has risen more than 20% since trading near $330 in mid-March.
Lehman Brothers lifted its price target on Google to $530 from $450 amid expectations of market share growth and grow the pie of overall advertising dollars while expanding into new products and other forms of media.
Goldman Sachs raised its 2006 earnings estimate to $9.39 from $8.87 a share and its 2007 earnings forecast to $12.70 from $11.85 a share. Goldman said it believes Google continues to maintain its edge over rival Yahoo .
Revenue grew 79% to $2.25 billion. Excluding the payments Google makes to its content distribution partners, sales leaped 92% to $1.53 billion, above analyst expectations of $1.47 billion. Sales from Google's own properties grew at 97%.
Google handily beat sales estimates while not sacrificing margins, noted Goldman Sachs analyst Anthony Noto, who estimated that Google's cash flow margin came in at a better-than-expected 65.5%.
Additionally, Google's search sales grew faster than Yahoo's revenue from search, according to analysts.
On a sequential basis, Google grew its revenue by 19%, or more than twice as quickly as the estimated 9% to 10% sequential growth rate that analysts estimate Yahoo's search revenue grew in the same period.
Google controls 49% of the market for Internet searches and has been gaining market share against rivals like Yahoo Inc. and Microsoft Corp.'s MSN service, according to data provided by Nielsen//NetRatings. As its share of that market grows, Google is capturing a greater portion of online advertising spending.
'Our own internal estimates show that we're gaining share in all of our key markets in the U.S., U.K. and newer markets like India,' Google Chief Executive Eric Schmidt said on a conference call following the report.
Strong ads on owned properties, international
Google derives advertising revenue from marketers who bid to place their ads on the search engine's properties, as well as Google's partner sites. In the quarter, Google grew sales on its sites by 97%, faster than the growth rate of its overall sales. As of the end of the March quarter, Google derived 58% of its sales from paid search advertisements on its own Web sites. It generated another 41% from its distribution partners, which include content sites and other search engines.
Google's sales from international operations rose 91% to $936 million and now account for 42% of total sales vs. 39% of total revenue in the same period a year ago. Sales from the U.K. accounted for 15% of total sales.
Schmidt called international sales 'very, very strong.'
Google added 1,110 employees in the quarter, expanding its work force by 20% to 6,790.
Outlook
Google doesn't provide forecasts.
Wall Street analysts expect Google will earn $2.06 a share on sales of $1.58 billion in the second quarter.
For the full year, analysts expect Google to earn $8.74 a share, up 53% from a year earlier, on sales of $6.7 billion, a rise of 68%. This story was supplied by MarketWatch. For further information see www.marketwatch.com.
© 2006 AFX News
