Google beats expectations and brings in the cash, but I'll pass on stock for now

Posted Oct 17th 2008 9:27AM by Steven Mallas
Filed under: Earnings Reports, Internet, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Time Warner (TWX), Technology

The most famous search engine in the world, Google (NASDAQ: GOOG), reported third-quarter numbers on Thursday after the market closed for the day. They were pretty good, all things considered. But hold on before buying the stock. Let's get to the data first.

Google saw its top line increase over 30% to $5.5 billion. On an adjusted basis, earnings per share came in at $4.92 per diluted share. That was good for only a 6% rise in the bottom line, but it did handily beat analyst estimates. According to this source, expectations were for $4.75 per share. Even better, net cash from operations soared just about 34% to roughly $2.2 billion. There's no question that Google has a good advertising model with its search-based technology. Indeed, Google is an innovative leader and a major brand on the Internet. It offers an efficient way for advertisers to target users who might be interested in their products. And it's true that an advertiser can see what it's getting for its investment. Even competing against big guns such as Microsoft (NASDAQ: MSFT), Yahoo! (NASDAQ: YHOO), and Time Warner's (NYSE: TWX) AOL, Google more than holds its own (although I'd really like to see management make better use of its expensive YouTube acquisition -- check out this article by Sheldon Liber on the subject).

That being said, I think Google will still have troubles going forward in terms of the global financial meltdown. The economy could affect the company adversely. There's a debate going on as to how immune Google precisely is when it comes to the slumping macro environment. Who knows who's right in the debate, but I have a better question for you: shouldn't you wait for the shares to go down again before entering a position? Google's stock closed up 4% on Thursday and, at the time of this writing, it was up 10% in the after-hours session. At the very least, I believe it would be prudent to wait for Google to pull back before buying shares. Let the stock settle a bit. I don't think an investor (or, especially, a trader) would want to be chasing the shares after they've experienced a run-up. I'd rather get Google closer to its 52-week low if I were interested in it. Who knows, maybe you'll get a better price on Friday...

Disclosure: I don't own any company mentioned; positions can change at any time.

Tags: AOL, featured, GOOG, Google, Microsoft, MSFT, online advertising, OnlineAdvertising, Sheldon Liber, SheldonLiber, Time Warner, TimeWarner, TWX, Yahoo, YHOO, YouTube

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Reader Comments (Page 1 of 1)

10-17-2008 @ 2:54PM

Peter Hanzford said...

Actually there is a better search engine to the Google or MS/Yahoo monopoly, it is this new (small) search engine called Anoox.

IMHO, after having tried anoox as user and advertiser for last year, it truly is better on multiple levels, not all levels I should add, but it should definitely be in your Internet tool bag as user and advertiser. In super summary people in the know think Anoox is better because:
1- Its search results are powered by the people, that is you and me, unlike Goo and Yoo whose results are powered by machines and many studies have shown that the "Wisdom of crowds" is better than code of machines.
2- Cost of Advertising on Anoox is much lower because it is a not profit motivated search engine, very much like Craigslist is for Classified advertising. And I say that from our own experience: our company has saved like $2,000/month since we switched our advertising to Anoox from Google. Now that is serious savings that we can apply to paying our rent, buying more equipments, etc.

Cheers all :)