(Adds UBS price target cut, updates share movement)
Oct 9 (Reuters) - Soleil Securities downgraded Google Inc (GOOG.O) to “hold” from “buy,” saying softness in the company’s advertising revenue growth might worsen as the economy weakens and competition looms.
Separately, UBS cut its price target on Google stock to $525 from $700, and said a challenging economic environment should continue to hurt companies exposed to advertising.
“We believe companies with ad-driven business models will be revised downward more harshly than an average S&P company owing to their high fixed-cost structures,” Soleil Securities analyst Laura Martin said, citing tight consumer spending and a weak housing market.
Martin slashed her price target on the stock of the company, which has reported slowing advertising growth over the past three quarters, to $350 from $580.
“EPS downside may be worse at Google as cost management may lag revenue weakness because Google may be unwilling to cut people or investment levels owing to their more than $13 billion cash horde,” Martin said.
The competitive environment in search is worsening, the analyst said, adding that any market share taken by others in search will largely come from Google because it is the largest player.
UBS analyst Benjamin Schachter, who also cut his price targets on the stocks of Yahoo Inc YHOO.O to $20 from $28, and eBay Inc (EBAY.O) to $18 from $28, said he believes Google is better positioned than its peers.
“We believe the macro will also clearly negatively impact 2009 ad budgets, however online should hold up relatively better as the shift to a more accountable media is accelerated,” Schachter said in a note to clients.
Shares of Google were down $1.48 at $336.63 in afternoon trade on Nasdaq. (Reporting by Shrutika Verma in Bangalore; Editing by Deepak Kannan)