GOOG: What Google Stock Investors Need to Know About Earnings

by Robert Martin | July 18, 2014 7:50 am

Google (GOOG[1], GOOGL[2]) reported earnings yesterday and, much like the stock’s year-to-date performance, it was a pretty mixed bag.

In case you missed it, shares of GOOG stock sank an ugly 15% from early March to early May, but then began a slow-and-steady upward climb since then.

Leading up to the release of second-quarter Google earnings, shares took a slight dip. By the end of the day, Google stock had lost almost $9 per share — a slide of about 1.5%. But then after earnings and in the premarket, shares of GOOG regained more than 2% … putting us about where we started.

So how did Google earnings turn out? Here’s a quick recap: Revenue tallied $15.96 billion, a 22% increase year-over-year that bested analysts estimates of $15.6 billion. Meanwhile, Google earnings tallied $3.42 billion, or $4.99 per share. That’s a solid increase of 6% from the same quarter in 2013. Adjusted earnings, on the other hand, came to $6.08 per share, falling short of Google stock analysts’ expectations of $6.23 per share.

According to some experts, the rise in Google stock was because the strong revenue growth eclipsed the not-so-hot non-GAAP earning results. But the earnings miss wasn’t the only blemish on the Google earnings report.

Instead, the biggest problem can be summed up in two words: mobile advertising. “Cost per click” dropped 6% year-over-year, largely because the search giant simply can’t charge as much money for ads that pop up on phones as they do for ads that pop up on desktops. As The New York Times noted, “That is in line with Google’s two-year trend of declining ad prices.”

Of course, Google doesn’t actually break out mobile ad revenue vs. desktop revenue — likely because it of course dreams of a complementary relationship between the two screens. As Ellen Huet of Forbes summed it up[3]:

“CFO Patrick Pichette emphasized that the company will look to give users an experience that is not just ‘mobile’ or ‘desktop’ but a neverending stream between the two, an initiative that was also played up at the annual developers conference in June.”

But these big-picture ideas of connectivity and a seamless screen experience are fluffy, to put it gently, while there are plenty of other concrete concerns for Google stock investors. In fact, Michael Liedke at Associated Press[4] summed up a few other considerations nicely:

“Meanwhile, the company’s expenses are steadily rising as it hires more workers, promotes products and ventures into new technological frontiers such as Internet-connected eyewear, driverless cars and robots.

Those trends have frustrated many investors, causing Google’s stock to lag the broader market this year even though most analysts still view the company as a prudent long-term investment.”

All in all, the mixed sentiment surrounding Google stock hasn’t shifted much in the wake of the recent earnings report. It’s hard to bet against a name as visible and ubiquitous as Google. But lately, it’s also been hard to be particularly bullish on Google stock. Many experts continue to tout GOOG as a great “long-term investment” … but that seems to be a common cop-out when there’s little to make a short-term bullish case.

Even with another Google earnings report in the books, that hasn’t changed.

As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.

Source URL: https://investorplace.com/2014/07/goog-google-stock-investors-need-know-earnings/

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