Investors Should be Wary of Google: Analysts

MOUNTAIN VIEW, Calif. (TheStreet) -Google (GOOG) shares have lost 6% over the past twelve months as the company wrestles with its long-term growth strategy, particularly in mobile. Set against this backdrop, investors may want to stay away from the bellwether for the time being, analysts say.

The Internet giant posted below-consensus fourth-quarter earnings after market close on Thursday, prompting yet more questions about its search for new revenue.

Although Google boasts multiple Internet services, there are plenty of places where it's playing catch up. The tech giant, for example, lags behind the likes of Facebook and Twitter in social networking, and trails way behind Apple's (iTunes) in online music.

Mobile is another area where Google has work to do, according to BGC Partners analyst Collin Gillis, noting that it's not a material revenue driver for the firm. "Mobile will have to be monetized in a different way than customary desktop search, and Google is trying to do that by capturing the entire experience, with things like Google Wallet and other initiatives," explained the analyst, who downgraded Google from buy to hold.

This, however, could be some way off.

Wells Fargo analyst Jason Maynard said in a research report that mobile usage is approximately two years ahead of mobile advertising. He rates Google shares at market perform with a $620 to $640 price range.

Mobile advertising trends are expected to rise in the future, but analysts were shocked that Google's cost-per-click (CPCs), money paid for each click on an ad, did not rise this quarter. "The big negative surprise in CPC came as that figure was down 8% year-over-year versus our estimate of up 8%," Maynard wrote in his report.

Google did not give a blended revenue run rate on CPCs, which suggests that mobile advertising may have a lower revenue run rate for now.

Speaking during a conference call late on Thursday, Google's chief business officer Nikesh Arora said that mobile usage is growing "leaps and bounds", led by smartphones and tablets. Google CEO Larry Page added there are now over 250 million activated Android devices, and said the holiday shopping season helped increase mobile usage, as consumers increasingly searched for products to buy.

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