Free Annual Reports
Google Earnings Golden
Led by stronger than projected search advertising results, Google (Nasdaq:GOOG) earnings soared again. Revenues grew in the third quarter by 23%, while income surged 32%. The company resumed its torrid growth, which the market rewarded as the stock rocketed up on the news.
IN PICTURES: 5 "New" Rules For Safe Investing
Search Ads Continue Strong
Google's revenue rose from $5.94 billion in Q3 last year to $7.29 billion in this year's quarter. Earnings jumped from $1.64 billion or $5.13 a share, to $2.17 billion or $6.72 a share, in the same period. Excluding certain costs, income was $7.64 per share. The strength in search ads was augmented by the growth in display and mobile ads. Internet display ads, led by YouTube, are projected to bring in $2.5 billion this year, while mobile ads should add another $1 billion.
The Model Is Expanding
One of the major criticisms of Google has been that it has had a one-dimensional business model - paid search. Other criticisms tend to be a derivative of this, such as the criticism that Android was not being sufficiently monetized. Google is increasing revenue and expansion of its display, both internet and mobile, though it accounts for only 6% of current net revenue, shows intriguing possibilities for growth. The company has said it will continue to grow aggressively, and has indicated the areas beyond non-search growth may be lucrative.
Beyond Search
The internet continues to percolate with activity, including potential deals stemming from rumors that AOL (NYSE:AOL), with private equity investors, were looking to buy Yahoo (Nasdaq:YHOO). While observers debate whether this is prudent or even possible, it shows the appeal of internet synergies as these companies go forward.
Yahoo and AOL are companies that could use some strengthening, whether it's through forming an alliance with each other or with other partnerships, whereas China's internet giant Baidu (Nasdaq: BIDU) does fine alone. Although it has been dubbed the Chinese Google, it has expanded far beyond search, with interests in gaming, e-commerce, and other marketing areas which help intensify what is already staggering growth. Google's spreading of its core business model - search - is actually a bit akin to the Baidu model of being heavily involved in different revenue channels.
Google's Future
Of course, Google still has its critics. Some point out that competitive inroads could take market share from Google's core search business and damage its business growth. Taking search share from Google, however, won't be easy. Other observers feel Google will continue to demonstrate its strong growth, particularly by leveraging its earnings. You can translate this to mean Google will spread its business into other areas. Google's spread may eventually extend farther than most observers think. As Google continues to explore new areas such as streaming video and Google TV, might we see Google become a content company as well, taking on Netflix (Nasdaq:NFLX) and eventually cable and satellite in a more meaningful way? Contemplate a future Google as a content and information giant.
The Stock
Google stock price has just retouched the $600 realm off the strength of this earnings report. Yet with its blistering growth rate, it still sells at a multiple of around 26, less than this quarter's earnings growth rate of 32%. That doesn't mean investors should throw away caution. Though we like Google's expanding business model and its growth probabilities, we don't expect this quarter's results to be easily attained in the quarters ahead. Investors should give themselves and the stock some margin for error. But when there is that inevitable price pullback, that's when it's time to go for Google. (For related reading, take a look at 7 Hot American Brands Riding The Recession.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 5 "New" Rules For Safe Investing
Search Ads Continue Strong
Google's revenue rose from $5.94 billion in Q3 last year to $7.29 billion in this year's quarter. Earnings jumped from $1.64 billion or $5.13 a share, to $2.17 billion or $6.72 a share, in the same period. Excluding certain costs, income was $7.64 per share. The strength in search ads was augmented by the growth in display and mobile ads. Internet display ads, led by YouTube, are projected to bring in $2.5 billion this year, while mobile ads should add another $1 billion.
The Model Is Expanding
One of the major criticisms of Google has been that it has had a one-dimensional business model - paid search. Other criticisms tend to be a derivative of this, such as the criticism that Android was not being sufficiently monetized. Google is increasing revenue and expansion of its display, both internet and mobile, though it accounts for only 6% of current net revenue, shows intriguing possibilities for growth. The company has said it will continue to grow aggressively, and has indicated the areas beyond non-search growth may be lucrative.
The internet continues to percolate with activity, including potential deals stemming from rumors that AOL (NYSE:AOL), with private equity investors, were looking to buy Yahoo (Nasdaq:YHOO). While observers debate whether this is prudent or even possible, it shows the appeal of internet synergies as these companies go forward.
Yahoo and AOL are companies that could use some strengthening, whether it's through forming an alliance with each other or with other partnerships, whereas China's internet giant Baidu (Nasdaq: BIDU) does fine alone. Although it has been dubbed the Chinese Google, it has expanded far beyond search, with interests in gaming, e-commerce, and other marketing areas which help intensify what is already staggering growth. Google's spreading of its core business model - search - is actually a bit akin to the Baidu model of being heavily involved in different revenue channels.
Google's Future
Of course, Google still has its critics. Some point out that competitive inroads could take market share from Google's core search business and damage its business growth. Taking search share from Google, however, won't be easy. Other observers feel Google will continue to demonstrate its strong growth, particularly by leveraging its earnings. You can translate this to mean Google will spread its business into other areas. Google's spread may eventually extend farther than most observers think. As Google continues to explore new areas such as streaming video and Google TV, might we see Google become a content company as well, taking on Netflix (Nasdaq:NFLX) and eventually cable and satellite in a more meaningful way? Contemplate a future Google as a content and information giant.
The Stock
Google stock price has just retouched the $600 realm off the strength of this earnings report. Yet with its blistering growth rate, it still sells at a multiple of around 26, less than this quarter's earnings growth rate of 32%. That doesn't mean investors should throw away caution. Though we like Google's expanding business model and its growth probabilities, we don't expect this quarter's results to be easily attained in the quarters ahead. Investors should give themselves and the stock some margin for error. But when there is that inevitable price pullback, that's when it's time to go for Google. (For related reading, take a look at 7 Hot American Brands Riding The Recession.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Free Annual Reports
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=942bceef1115d805635e5c2107879de1
