GOOG Stock: 4 Things to Know About the Google Earnings Miss

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Google (GOOG) had a not-so-hot Friday last week, as shares fell 3% thanks to Thursday evening’s earnings miss. That puts Google stock a rough 9% in the red since the year kicked off, including a steady 14% slide over the last month alone.

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Source: ©iStock.com/LindaJoHeilman

Considering what was in the actual Google earnings report, though, that 3% tumble really wasn’t all that bad. Let’s take a closer look at the Google earnings miss, and what folks are saying it means for GOOG stock going forward.

The Scoop on Google Earnings

Double Miss: We have to start with the raw numbers, of course. Adjusted Google earnings tallied $6.35 per share — 18 cents short of what analysts were expecting. The disappointment didn’t stop on the bottom line, though. Google disappointed for sales as well, reporting revenue of $16.52 billion vs. the $16.57 billion slated.

Too Much Spending? While that top-line miss in disconcerting, many are pointing to heavy spending as the real problem for Google stock. As USA Today put it, there has been “growing concerns from analysts on heavy spending on new hires, data centers and cutting-edge technologies such as drones, driverless cars and Internet-connected eyewear.” The Google earnings miss just brought those concerns to light once again. Then again, Bernstein Research sees some of that spending as a bullish sign for GOOG stock. In a recent research note, the firm noted that headcount grew 22% year-over-year — faster than revenues or gross profits and faster than what they expected — but stated that they believe “headcount growth is a good indication of long term opex growth.”

A Slower Decline: Another go-to talking point when it comes to GOOG stock is the good ol’ cost-per-click metric — the bread and butter of Google’s business. And when it comes to CPC, we have further proof that expectations are everything. In the most recent quarter, CPC fell 2% year-over-year. While a decline may seem worrisome in a bubble, that’s a slowing decline. Last quarter, the drop was a painful 6% year-over-year.

A Silver Lining? And while we’re being optimistic about Google stock, it’s worth noting the reaction from InvestorPlace expert Dan Burrows. His take: While Google earnings were far from impressive, the relatively muted reaction from the market makes the case for buying GOOG stock even stronger. In his words:

“Google earnings and the market reaction really do affirm the bull case on GOOG, a stock which looks cheap by many measures.

You’ve got to feel comfortable with Google when it can give the market so many reasons to pound GOOG, and GOOG goes mostly unscathed anyway.”

What’s Next

So now that the Q3 disappointment is in the rear-view, what’s next for Google stock? Well, the Q4 expectations are for earnings of$6.93 per share on sales of $14.63 billion. And in the longer term, analysts expected 16% growth per year over the next five years — hardly anything to sneeze at. If you believe Google stock can keep climbing at a similar pace, now might be the right time to snag some shares for relatively cheap.

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


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/goog-stock-google-earnings/.

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