This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Google: Cheap and Expensive

Apple's first-quarter earnings results serve as a perfect example. That Apple missed revenue estimates and sold 200 million fewer iPhones than the Street would have liked proves how much of a force Android has become. For that matter, if Google's expenses only served to hurt Apple, I think Google's management would consider that a win.

Then there's Research In Motion (RIMM), which just unveiled its new line of phones with the new BB10 operating system. Google can assume RIM would not adopt its model and undercut Google by licensing out BB10.

Plus, with Apple having recently surpassed Google in device sales in the U.S., Google can't afford to make it a three-team race. Also, it's not as if Microsoft is going to remain idle and cede what market share it has left.

After reporting earnings last month Google shares shot up and have not stopped climbing, reaching as high as $776. It seems foolish to complain about a stock that's producing $3 billion in profits and growing revenue annually by 36%.

However, the stock seems a bit expensive now that the valuation has reached a P/E of 24, especially when compared to Apple's P/E P/E 10.

Granted, they are in different businesses, but Apple's low valuation is equally hard to justify.

As for this quarter and Google's overall improvements, CEO Larry Page offered this in a statement:

"We ended 2012 with a strong quarter. In today's multi-screen world we face tremendous opportunities as a technology company focused on user benefit. It's an incredibly exciting time to be at Google."

I couldn't agree more. Google is no longer burdened by the Motorola acquisition after having auctioned off the home business to Arris for $2.35 billion. The portion of Motorola Google still owns has the potential to help Google drive Android further and strengthen its smartphone position.

In the meantime, as the company continues to grow its global smartphone position Google should be able to command more from advertisers, a notion that makes the shares look cheap.

With Google's strong cash flow rate and impressive revenue growth, it's not unreasonable to expect shares to reach the $900 level.

At the time of publication the author had a position in AAPL.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
GOOG $565.06 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
TSLA $218.42 0.00%
YHOO $44.52 0.00%


DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs