Google big fish AP
Citigroup has a super bullish analyst note about Google today,

The gist: the stock is cheap, Facebook isn't that big a deal, and YouTube and local are going to be huge.

Citi also says there's some transition questions about Larry Page taking over, but it doesn't seem all that worried.

Here's some highlights from the note:

  • Search ad spending looks like it's going to keep growing like before.

  • The valuation is cheap. Google has a cash-adjusted price-earnings ratio of 14, which is roughly in line with the S&P 500. This is pretty startling: there is no way Google doesn't grow much faster than the S&P. (The stock could do anything however, of course.)

  • Facebook isn't that big a deal. Sure, Facebook is growing, but it's mostly taking ad dollars from TV ad budgets, which doesn't affect Google, and display budgets, which only affects Google at the margin. So Facebook's growth isn't bad for Google, at least in the short term. This is a good point: too often competitive battles between tech companies are portrayed as a zero-sum game where one company winning means the other losing, but it's not always that way.

  • YouTube is huge and is going to get bigger. "Q1 data shows YouTube's share of total videos streamed remaining at a very high 41%. Further, our proprietary YouTube Ad Tracking Analysis shows 81% of YouTube's Top 100 Videos now being ad-monetized vs. 77% in Q4 and approximately 60% a year ago." As YouTube keeps growing (both in size and in importance as video generally moves online), and as Google keeps getting better at monetizing it, it's going to become a huge moneymaker.

  • Google is going to make tons of money on local ads. This is interesting. Citi is bullish on Google capturing the local advertising market, which has eluded tech companies since the start of the internet. Between Search, Maps and Places, Google is well positioned to grab the local advertising market, Citi thinks. Google's local efforts are mostly remembered for its failed bid to acquire Yelp and Groupon, but that doesn't mean Google can't grab a big slice of the local ad pie. In fact, Groupon's success might be good for Google, since it might incline merchants to try other kinds of local advertising as well.

  • Google still drives most of the traffic on the internet. Citi ran a survey that shows that Google still drives most of the traffic on the internet. It doesn't mean Google is going to keep dominating, however. Facebook drives an increasing amount of traffic. Nowadays Facebook is the first or close #2 referrer to many media sites, and Facebook referrals to e-commerce sites are growing. This is a big deal. On the internet, traffic is power and money.

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