Overall, I came away with a sense that the company is still experiencing very solid growth, but that they didn't raise the bar in any area this quarter. Nothing really stood out to me as exceptionally strong. They talked about a lot of areas within the company where people are working on cool things, and improvements to existing apps, but the revenue base is getting so big that it will take even longer for one of these areas to start to move the needle. For now, it's still ads, and mobile ads probably have the most near-term promise.
As for the stock, I still don't think it is expensive for the leading Internet company (do people still use that term?), and so I am not worried about too much downside. But the stock just isn't in favor right now, like a lot of large-cap tech stocks. I think once the market gets past this period of uncertainty, and growth stocks begin to lead again, then it will be time to add to GOOG again.
Preview
Google (GOOG - commentary - Cramer's Take) reports earnings after the close on Thursday. This will probably be one of the most widely anticipated calls of this earnings season. Since the company doesn't provide guidance, it is also a difficult one to handicap.
For what its worth, Google has beaten consensus estimates in three of the last four quarters, as it usually does. Consensus estimates are for EPS of $4.45 on revenue of $3.45 billion (excluding traffic acquisition costs). Earnings before interest, taxes, depreciation and amortization margins should be in the 59% to 60% range.
There has been a lot of chatter in recent weeks that data from the likes of comScore hint at a drop in things like the "click-through rate." Also, comments from eBay (EBAY - commentary - Cramer's Take) that the company had pulled back in its own online ad spend have raised concerns about an overall slowdown in e-commerce. Expectations are always high for Google, so if the company acknowledges that it is feeling some of this slowdown, it won't be good for the stock.
Internet Has YHOO Hit Rock Bottom? 1/30/2008 11:48 AM EST The company reported revenue of $1.40 billion, EBITDA of $527 million and EPS of 15 cents.
Internet ETFC: Two Sides to the Story 1/25/2008 3:39 PM EST The Street is negative on the company's earnings, but there were quite a few positive metrics reported.
At the time of publication, Kahn was long Google.Jordan Kahn, CFA, is a portfolio manager with Bevery Investment Advisors, a Beverly Hills, Calif., money manager. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Kahn appreciates your feedback; click here to send him an email.
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