5 Reasons Google Stock Still a Buy After Post-Earnings Pop

Google (GOOG, GOOGL) was the talk of Wall Street last week after a tremendous earnings report that topped analyst expectations.

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But it wasn’t just raw numbers that were important, since accounting shenanigans and one-time charges can skew even a big company like Google on a quarter-to-quarter basis.

What really impressed GOOG stock investors, in fact, were the details that show big strength in key areas.

Because of this, Google stock remains a strong buy even after a one-day pop of more than 20%. Here’s why:

Mobile Might: Google’s Android OS is the most dominant smartphone platform in the world, beating out Apple (AAPL) and its iPhone in regards to total users. Still, making money off mobile hasn’t been easy despite this market share. Google’s pledge in its earnings call to continue its focus on mobile was well received, buoyed by a “buy” button that allows folks to shop easily on their gadgets. As for mobile ads, “cost per click” metrics finally moved higher on smartphone and tablet advertisements. Also, GOOG revealed that more searches happen on mobile devices than desktops in 10 nations worldwide — a good sign that its eponymous search engine remains on the top of the heap in a mobile age.

YouTube Dominance: Engagement with Google’s flagship video property remains incredibly impressive, with “watch time” up 60% year-over-year as users consume ever-increasing amounts of YouTube videos. Actual revenue metrics are murky, but married with a more successful mobile ad strategy you can be sure that all those pre-roll video advertisements are starting to add up big-time for Google. And who knows? Given the recent revelations from Amazon (AMZN) about its much-hyped Amazon Web Services arm, Google may reveal details on YouTube soon — something the CEO of this business arm has actually said she is in favor of.

Savvy CFO: This quarter was the first for newly minted CFO Ruth Porat, and she was incredibly deft on her debut call with analysts. Yes, the numbers are indeed the numbers … but revealing what Wall Street wants to hear in a way that makes analysts excited and keeps investors happy is a fine art — and Porat seems to have that skill. Sentiment matters in big-name tech plays like Google, and a perceptive CFO who can manage expectations is a plus for investor attitudes.

Analyst Upgrades: If you want a pure measure of sentiment, look no further than recent forecasts. Credit Suisse recently reiterated an “outperform” rating on GOOG stock and boosted its forecast to a $750 price target — another 15% upside from here. Needham reiterated a “buy” rating, too, with a $740 target, and BMO upgraded the stock to “outperform” after earnings. Those kinds of endorsements say a lot for the future prospects of Google stock.

Big Earnings: Let’s not forget that the bottom line is ultimately the bottom line. In the age when so many tech stocks — including the aforementioned Amazon — are struggling to make material earnings, Google remains a beacon of profitability. And the fact that the company trounced expectations of $6.70 per share with EPS of $6.99 shows the might of this tech giant. After the recent pop, the valuation of Google is a bit stretched with a forward price-to-earnings ratio of nearly 21, but the stock continues to show it has impressive growth potential to justify its earnings multiple.

There are plenty of other reasons to be bullish too — including double-digit growth on the top line and roughly $70 billion in cash and investments on the books — but these are the biggies.

As such, I’d have confidence buying Google here even after this big short-term pop.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/goog-stock-googl-google-earnings/.

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