Pivotal Research Downgrades Google (GOOG) to Hold

Pivotal Research downgraded Google (NASDAQ: GOOG) from Buy to Hold with a price target of $570.00 (from $640.00). Facebook (NASDAQ: FB), Twitter (NYSE: TWTR), and Yahoo!'s (NASDAQ: YHOO) price target were lowered to $105 (from $107), $41 (from $50) and $42 (from $49), respectively.

Analyst Brian Wieser said, "We are updating models and price targets, primarily accounting for changes in the costs of capital across our coverage universe and tweaking operating expectations. We are generally reducing YE2015 price targets – most notably Twitter’s – and downgrading Google from Buy to Hold as a result, though we emphasize that our view on the fundamentals of these companies aren’t meaningfully altered, which is also the case for Yahoo. Our view on Facebook is marginally better than it was previously (already very positive) but our price target is lower here, too."

"In our new quarterly model update ahead of 2Q15 earnings, the dominant factor impacting changes to YE2015 valuations across our coverage universe is the higher cost of capital incorporated into equity market valuations vs. our last round of quarterly updates in April. In general this should have a depressing effect on valuations," continued the analyst.

Wieser added, "These changes are most pronounced on Twitter where a disproportionate share of current period value is dependent on discounted value of future cashflows. While we remain positively predisposed towards Twitter’s business – certainly vs. most of the market, and slightly more than at the time of the last quarterly results – our new YE2015 price target is now $41 vs. $50 previously. We continue to rate Twitter Buy. Similarly, Google’s valuation is reduced now to $570 vs. $640 previously, but with the stock having risen to levels near this target since last December, we now rate Google Hold."

For an analyst ratings summary and ratings history on Google click here. For more ratings news on Google click here.

Shares of Google closed at $530.13 yesterday.

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