Google Inc. (GOOG) has suffered a slight pullback from its highs of $928, but there are three catalysts which will certainly help rectify this situation:
- A possible launch of a bid for the rights to the NFL’s Sunday Ticket package.
- It’s sought after by the “elite hedge funds.”
- Analysts are returning to “support mode.”
These catalysts will help to move Google on its next journey upwards, to recover the $928 position and continue towards the $1,000 mark.
The Influence of the NFL Deal
Google, being flush with cash, is looking for ways to spend it to extend its’ profits and leadership.
Google has been trying to find a way to extend its reach into television, and last Wednesday held meetings with the National Football League.
Presently, DIRECTV (DTV) airs the NFL Sunday Ticket package in which a user can watch out-of-market regular-season NFL games. However, after the 2014 season ends, the four-year contract of the company with the league will come to an end.
If the deal comes to fruition it may be a turning point for Google where the company will probably initiate a charge from customers for using its services, such as using a pay model to generate revenue from the product.
Analysts foresee that striking a deal with NFL will turn Google into a major platform for sports viewers. It can enhance the demand for services that are a step further to that of conventional cable, and can persuade users to sign up for broadband.
Hedge Fund Attitudes
At the end of the second quarter, a total of 159 of the “elite hedge funds” were long in Google, a change of 7% from one quarter earlier. With hedge funds’ capital changing hands, there exist a few key hedge fund managers who were upping their stakes significantly.
Presently, on average Google has a “Buy” rating and a consensus price target of $972.95. This has occurred despite analysts at Argus having decreased their price target on Google’s shares to $875.00 from $1,065.00 on July 22.
Also S&P analysts downgraded Google’s shares to a “market perform” from a “buy” on July 22 but increased the price target to $950.00 from $925.00 previously – an unusual situation.
However, on August 6, TheStreet bucked the downgrade trends by reaffirming their buy rating on shares of Google, giving a ratings score of A. Other analysts are sure to follow this path soon.
Note that the consensus price target is well above the price being experienced today.
Google is one of the great investment stories in the last 10 years. After going public in August of 2004, shares are up a market-crushing 691% in the last 9 years as Google has risen to one of the most dominant and innovative companies in all of technology. Take a look at the big gain in the chart below.
The company’s strengths can be seen in multiple areas, such as its rock solid stock price performance, robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations.
Therefore, based on the facts above the following options trade is recommended.
Options Trade: Buy the GOOG Oct 2013 950.000 call (GOOG131019C00950000) at or under $6.60, good for the day. Place a protective stop limit at $2.60 and a pre-determined sell at $9.90.