Google's Earnings Beat: Top 5 ETFs Riding The Gains

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Investors in technology exchange traded funds had plenty to celebrate as their investments blasted to new historic highs Friday, powered byGoogle's ( GOOG ) epic rise past $1,000 a share Friday on the wake of a third-quarter earnings surprise.

As IBD's Kevin Shalvey reported earlier, Google shares rallied 14% Friday. Thursday after the close, the search-engine powerhouse reported Q3 earnings climbed 21% year over year to $10.74 a share. Revenue surged 12% to $14.9 billion. The stock has returned 42% year to date. Both beat analyst estimates.

Moving Price Targets


An army of analysts raised their target price on Google shares including Credit Suisse, UBS, Raymond James, Wedbush Morgan, Macquarie, Deutsche Bank, Needham, JPMorgan, Jefferies, Cowen & Co., RBC, B. Riley, Canaccord Genuity, Cantor, Evercore Partners, Piper Jaffray and Pivotal.

Google can see a compounded annual growth rate ( CAGR ) in the midteens over five years as smartphone and tablets use grows, Credit Suisse analysts wrote in a client note Friday. They expect annual revenue growth of 39% for smartphones and 56% for tablets.

Google is "one of the best positioned to benefit from the proliferation of connected devices and the ensuing lift in engagement," they wrote. "We view the volume growth as a leading indicator of where its top line growth can go as pricing on mobile will eventually close the gap with desktop.

"While some on the Street continue to focus on the growing divergence between paid click growth and cost-per-click declines, we are ultimately focused on total revenue dollars and revenue growth," they continued.

Credit Suisse lifted its price target on the shares from $1,000 to $1,200.

Online-Ad Revenue Growth

S&P Capital IQ projects online U.S. ad revenue to climb 14% year over year in 2013, after growing 15% in 2012 and 22% in 2011.

"Corporations are committing larger percentages of advertising budgets to the Internet as people spend more time online, especially as compared with consumption of other media," Scott Fessler, an equity analyst at S&P Capital IQ wrote in a client note Friday.

"Moreover, Internet marketing offers notable targeting and data-focused return-on-investment capabilities."

Top ETF Winners

Social media, Internet and broad technology ETFs topped the stock market performance list Friday, soaring to new highs thanks to heavy weightings in Google.

1.Global X Social Media Index ETF ( SOCL ): +3.3% Friday; +60% year to date.

2.PowerShares NASDAQ Internet ( PNQI ): +3.1%; +53%.

3.First Trust Dow Jones Internet Index ( FDN ): +2.9%; +42%.

4.iShares U.S. Technology ETF (IYW): +1.8%; 16%.

5.Technology Select Sector SPDR (XLK): +1.61%; +15%.

IYW and XLK make for a potential "catch up" play because this year they've lagged SPDR S&P 500 (SPY), which has returned 23%.

IYW and XLK both trade at about 15 times forward earnings, about on par with SPY but cheaper than the technology sector's average, according to Morningstar data.

Follow Trang Ho on Twitter @IBD_THo .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: CAGR , FDN , GOOG , PNQI , SOCL

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