NEW YORK (TheStreet) -- Citigroup advised long-term investors to hang onto Google (GOOGL) , (GOOG) . Although Google would be significantly hurt by the loss of its search engine deal with Apple (AAPL) , Google's stock largely reflects this scenario already, Citi contended.
WHAT'S NEW: Google's stock already largely reflects the potential loss of Google's search engine deal with Apple, Citigroup analyst MArk May wrote in a note to investors today. Citigroup says investors became increasingly concerned that Google could lose the contract after Apple recently switched its mobile search provider for Siri and Spotlight from Google to Microsoft’s (MSFT) Bing and Mozilla recently switched from Google to Yahoo! (YHOO) , Yandex (YNDX) and Baidu (BIDU) in several countries. If Google is completely removed as the default search engine for Apple's Safari browser, Google's revenue would drop by $6.6B in 2015 and its 2015 EBITDA, excluding certain items, would take a $3.4B, or 11%, hit, the analyst estimated. After factoring in this scenario to his forward estimates and adjusting for growth, May estimates that Google is trading at an EBITDA multiple that is in-line with other U.S.-listed large cap Internet stocks. He kept a $652 price target and Buy rating on the shares.
WHAT'S NOTABLE: Bank of America on December 5 downgraded Google to Neutral from Buy, saying that the company is facing several headwinds, including the maturity of its search business, a lack of products that can provide catalysts, and margin pressures as it invests in competitive businesses.The firm predicted that the company's results would miss expectations.