Google Shareholders Were Always Second Class: Analyst

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Google’sboard has approved anew class of non-voting shares, effectively lowering the already-low voting rights of average investors.

So what? At least, that’s the reaction from analyst Mark Mahaney from Citi.

“If you’ve invested in Google, you knew from the beginning that you were a second-class shareholder. They’ve just made that a little bit more apparent last night,” said Mahaney.

This analyst is more interested in the Google’s future earnings, which he says will rise.

“In 2013, we still think they can do $50 in earnings [for the full year],” said Mahaney. “We have a 20 percent revenue and a 20 percent earnings grower here, and we think that’s worth at least a 15 times multiple," referring to how much investors pay per dollar of earnings.

Compared to its Internet industry peers, averaging a 19 times multiple, Google’s price looks pretty attractive. Citi has a $750 price target on the stock , which traded around $626 on Friday.

And over the past 52 weeks, Google’s shares are up 10 percent. So, whether you’re a “class A” or “C” shareholder, Mahaney says things look good.

That said, some are disappointed with Google, and are less-than-ready to lose voting rights while watching blockbuster outperformance from competitors such as Apple.

“This was one of the least interesting quarters that Google’s printed in about three years. The after-market [share price] move was also the smallest we’ve seen in that time, because results came right in line with the Street,” said Mahaney.

One investor, Ken Hackel of CT Capital, thinks Google need not worry too much about last quarter, or Apple’s dominance, simply because its shares are relatively cheaper.

“Google continues to grow free cash flow by over 20 percent. Something wrong with that? And that’s on top of a low valuation,” said Hackel,in a separate interview.

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Mark Mahaney does not personally own Google stock. Citi is a market maker (matched buyers and sellers) in Google securities, and has acted as a manager or co-manager of an offering of securites of Google.



Follow Jennifer Leigh Parker on Twitter @jparker741.