Not even a week after dropping Google stock from a “buy” to a “sell,” Standard & Poor equity analysts have upgraded Google to a “hold.”
In a research note Monday, S&P analyst Scott Kessler said his firm was upgrading shares of Google “on valuation.”
“Since a recent intra-day high established less than four weeks ago, [Google] has fallen some 22%, below our 12-month target price of $500, and we now see it as fairly valued,” he wrote.
In an interview with Reuters, Kessler said, "It's very hard for us to say sell this stock when it's trading below its target price.” Shares in Google closed at $498.17 Monday.
Last Tuesday, after Google disclosed its decision to acquire Motorola Mobility, S&P said it was cutting Google’s price target to $500 from $700 and dropping its rating to “sell.”
“This proposed deal has injected a tremendous amount of uncertainty into Google and the stock,” Kessler told Adweek at the time. “Typically those things are not good for investors.”
Despite Motorola’s valuable portfolio of about 17,000 patents (and another 7,500 pending), with Android-related lawsuits already ongoing, the deal gives no guarantee that Google is in the clear, Kessler said. Beyond that, he added, the Motorola acquisition will negatively impact the larger Android ecosystem—not to mention the damage the deal stands to do to Google’s balance sheet, he said.
In its note about the upgrade Monday, S&P said that although Google is fairly valued, analysts continue to view the proposed Motorola deal as a risky one.
“Specifically, we wonder if/when the deal will be consummated, whether it would protect Android from patent issues, how the platform could be adversely affected, and to what extent it would weaken Google’s business model,” Kessler said.