Carlos Kirjner of Bernstein Research believes the Internet giant's share price could hit $1,000 over the next 12 months, as the adoption of smartphones, tablets and the mobile Web all flow to Google's bottom line.
Kirjner believes that concerns about mobile being bad for Google are overblown. In the company's
fourth-quarter results, cost-per-click (CPC), a key metric for ads, fell 6% year-over-year, but actually rose 2% sequentially, alleviating some of Wall Street's biggest concerns. "We believe mass adoption of smart phones, tablets and the mobile Web is a large value creation opportunity for Google. In other words, we disagree with the most popular Google bear case, which posits that mobile is bad for revenue growth and profitability," Kirjner wrote in his report.
There has also been a nagging concern that Android, though it's the dominant mobile operating system, would not make any money. Perhaps that line of thinking is wrong, though, and Android can indeed be profitable for Google. Google has become what Apple (AAPL - Get Report) was in 2012, something of a Wall Street darling. The stock has gained more than 12% this year, fueled by investor optimism about the innovation going on in Mountain View, Calif. Google Glass is one such innovation, casting Google in a positive light. "For years, Google has been perceived as investing in products that never seem to come to market," analyst Brian Sozzi wrote, in an email. "But, with pictures of a self-driving car floating around the Internet, and Google Glass set for release, it's very apparent years of investment are about to be unleashed into the everyday environment."
Kirjner believes most of the upside in Google comes from mobile, especially YouTube, which he calls "an underappreciated asset." With people spending more and more time watching video on the Internet, YouTube's growth is not yet fully appreciated by the market. Kirjner believes that YouTube is already a multi-billion dollar business with strong growth and good operating margins.