It wasn't long ago that analysts were murmuring that Google's stock (GOOG) was about to be a big winner again. Not anymore. Now everyone's cutting their Google estimates.

Yes, most of the cuts are blamed on the strengthening dollar, which will cut into Google's foreign profits. But there's also the not-exactly-stunning recovery of the core business and the complete dud known as the Nexus One.

Google still needs to find that big second revenue stream. Until it does, the stock will likely be stuck in the mud.

Here's Mark Mahaney of Citi:

Lowering Estimates On FX — We have lowered our 2010 Net Revenue ests by 2% to $20.5B & our 2010 Non-GAAP EPS by 3% to $27.41 due to a material change in our FX assumptions (sig. Euro weakness), and to a lesser extent, to reduced Nexus One unit sales ests. We have made similar reductions to Q2 and 2011 ests. Channel Checks suggest, however, that Core Biz Trends are at least In-Line.



Channel Check #1: Takeaways From Proprietary Quarterly SEM Call – On 6/11, we hosted our Q2 SEM call with leading firms Covario, SearchIgnite, Efficient Frontier, and Clickable. Our takeaway is that GOOG’s core Search biz continues to see an improvement vs. H2:09 levels. Our checks are seeing solid Q/Q Q2 Search spend growth, w/ the Travel, Retail, and Finance verticals as strong. Also, the SEMs are looking for 14%-20% 2010 spend growth, consistent with our GOOG estimates.



Channel Check #2: CPC Datapoints – Organic CPC (Cost Per Click) trends, which were negative in Q1, appear to have reversed and are positive in Q2, with particular growth in the Retail & Travel verticals. Specifically, Efficient Frontier is tracking high single digit+ % Q/Q growth through May. FX headwinds will dampen CPC moves, but our 1% Q/Q CPC assumption seems highly reasonable.



Channel Check #3: comScore qSearch Market Share Trends – Per our 6/10 note, GOOG’s share of U.S. Queries reached an all time high of 66.4% in May, when adjusting out for contextual/slideshow searches.



Reiterate Buy & Top Pick, With PT Reduced From $640 to $630 — We maintain our 20X target P/E multiple on our 4% reduced Non-GAAP 2011 EPS of $31.30. Our $630 PT implies approximately 30% upside. We continue to believe that a non-UK International Macro recovery and a material contribution from GOOG’s new revenue initiatives will over the next 1-3 quarters – NOT 1-3 years – likely combine for a Breakout Quarter.