Google On Deck: Investors Eye Mobile

NEW YORK ( TheStreet) -- Google's ( GOOG) set to report third-quarter earnings tonight, and all eyes will be on the Internet giant's cost-per-click (CPC), as the world transitions to a post-PC era.

CPC is one of the key metrics Wall Street uses for Google's main business - ad sales. As the world moves towards smartphones and tablets, CPCs go down, with ads harder to monetize on these devices than on desktops.

Some on Wall Street are looking for CPCs to bottom out this quarter, including Wells Fargo analyst Jason Maynard. "We expect that CPC declines are probably close to bottoming out," he wrote in a note. "Additionally, we think mobile trends are beginning to improve, and the FX environment is getting better, which in our opinion could provide a moderate cushion for the company going forward." He rates Google shares "outperform" with a price target range of $680 to $720.

Should Google show any kind of material improvement on CPC, this could be bullish for shares, which have gained 16.97% this year. JPMorgan analyst Doug Anmuth notes that third-quarter search-engine marketing (SEM) checks showed improvements in CPCs. Anmuth is expecting an 11% decline year-over-year in CPC.

Analysts polled by Thomson Reuters expect Google to earn $10.65 a share on $11.862 billion in revenue for the third quarter, up from $9.72 a share on $7.51 billion in sales in the year-ago quarter. Last year's results, however do not factor in Google's acquisition of Motorola, which was completed earlier this year.

Monetizing mobile ad revenue has been the key worry for Google, as well as other companies that generate a significant portion of their revenue from advertising, including Facebook ( FB) and Yahoo! ( YHOO).

If the third quarter is the trough for CPC declines, than there's the potential for Google to exceed estimates going forward, says Piper Jaffray's Gene Munster, as it will have easier comparisons. Munster rates Google "overweight" with a $834 price target.

One thing investors may want to watch is the hardware business Google acquired when it bought Motorola. As Google increasingly builds its own hardware to compete with the likes of Apple ( AAPL) in smartphones and tablets, results from this division will become ever more important, with one caveat. Hardware has significantly lower margins than Google's core business, and that's likely to affect results going forward. Munster does not believe Motorola "will put forward any type of compelling smartphone to compete with Samsung and Apple until mid-2013."

Google will report earnings after the close of trading.

Interested in more on Google? See TheStreet Ratings' report card for this stock.

-- Written by Chris Ciaccia in New York

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