Google (NASDAQ: GOOG) increased both sales and income in the third quarter. The giant of online search, which issued its earnings release after the bell on Thursday, is saying what a plethora of companies are also saying: the worst of the economic downturn may finally be over.
According to TheStreet.com, sales, after traffic acquisition costs are taken into account, rose about 8%. On an adjusted basis, profit grew almost 20% to $5.89 per share. Our earnings preview article stated that expectations were for $5.38 per share. Google did a good job of giving the world a reason to believe that the rallies seen in the major market indexes should be taken seriously.
Google also showed shareholders the money. The statement of cash flows was indeed a sight to behold. Cash from operations jumped 25% in Q3. Even better, free cash flow soared well over 40%.
Sure, Google gets more than a decent amount of competition from Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO). Microsoft has been making waves with its Bing search engine, while Yahoo! is still trying to fight the good fight.
Let's be real, though: Google is a huge brand in search, and it still has a lot of growth left in its business model. Most people looking at this collection of quarterly data won't be able to find too much fault with it.
Of course, I don't think you should rush into a Google trade blindly. The stock was up over 3% in yesterday's after-hours session. Friday's price action will give us more information as to where Google heads from here.
Google's best days of growth may be behind it, but shareholders should enjoy years of capital appreciation. There are risks, of course; after all, another kind of search/advertising technology could conceivably come along that might disrupt Google's dominance. Still, this a blue-chip tech, it's a powerful leader in its field, and as such, it'll be delivering value to investors for a long time to come.
Disclosure: I don't own any company mentioned; positions can change without notice.
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