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Andreas in Andrey,

Investment idea - Google

Google recently published a decent report for the 3rd quarter of 2013. Consolidated revenue increased 12% y/y, net profit increased 36.6% y/y beating expectations by 4%. EBITDA grew 14% y/y. The company’s financials include the results of Motorola, which was recently acquired by Google. Google Sites segment was the most rapidly growing revenue component (+21% y/y and +5.8% q/q), with the driver in this segment being mobile search and YouTube. In addition, considerable growth was also registered outside the United States (+32% y/y); Japan, Korea and Australia shown the most rapidly growing rates of sales volumes. Significant revenue growth was also observed in the segment of paid clicks (+26% y/y). We believe that in the medium term Google Sites will continue to be the main revenue generator as well as sales outside the United States, especially on the Asian market. Besides, it should be noted that the purchase of Motorola improve patent protection of the company, that would facilitate the resolution of patent disputes with other companies.

Our medium-term fundamental value of Google shares is $1100. Short-term goal is $1100.