Will Google (GOOGL) Stock React To Its New Acquisition And Collaboration?

NEW YORK (TheStreet) -- Shares of Google  (GOOGL) are slightly down -0.38% to $588.35 in afternoon trading after the company announced it's acquiring Zync Render and entering a collaboration with VMware (VMW) and NVIDIA (NVDA) .

Zync Render provides visual effects cloud rendering technology and joins the Google Cloud Platform team to offer studios the rendering performance and capacity they need, while helping them manage costs. 

VMware, NVIDIA and Google will collaborate to deliver high-performance virtual desktops and workstation-class graphics to Google Chromebooks in hopes of expanding the hardware options for high-performance virtual desktops.

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Separately, TheStreet Ratings team rates GOOGLE INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate GOOGLE INC (GOOGL) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and feeble growth in the company's earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • GOOGL's revenue growth has slightly outpaced the industry average of 19.9%. Since the same quarter one year prior, revenues rose by 21.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although GOOGL's debt-to-equity ratio of 0.05 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 4.14, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for GOOGLE INC is rather high; currently it is at 61.68%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 21.44% trails the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.86%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 37.92% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market on the basis of return on equity, GOOGLE INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • You can view the full analysis from the report here: GOOGL Ratings Report

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