Google Looks Good Ahead of Earnings

click to enlarge

Internet advertising and search powerhouse Google (GOOG) will announce its most recent quarterly earnings on April 16. Options activity in the name has picked up dramatically, with primarily calls being written and positive sentiment expressed. Shares have surged nearly 20% in the past month from roughly $320 in mid-March to a $379 closing price on April 15. Upon reports of positive results in the past Google shares have swung 20% or more. At present value, Google is approaching the $400 mark, which some equity analysts have perceived as a resistance point. Mean analyst rating as recorded by Thomson Reuters is 1.64 (on a five point scale with 1 as a strong buy and 5 as a strong sell). This rating represents a slight strengthening in analyst sentiment over the recent period; three months ago, analyst sentiment was a consensus 1.70, a 6 basis point differential.

Piqqem Sentiment for Google has fallen from a February recent high of 2.7 (on a four point scale with 4 as strong buy and 0 as strong sell) to a low of 2.5 in early April, a 20 basis point plunge. But over the last week Piqqem Sentiment for Google has improved dramatically, rising 7 basis points to 2.57. This occurred even as the stock continued to rise. The sentiment shift indicates that Google may expect very strong results, perhaps as a result of cost cutting on personnel and infrastructure, but also due to the ongoing secular shift from traditional advertising to search-based advertising. Shorting Google into this dual sentiment upswing -- sell-side analyst and crowd -- would seem to be imprudent.

Disclosure: Long GOOG

Comments

[Mark Krieger:]

article is nice but a bit too bullish. The fact is, GOOG shares are up more than 50% from their lows and we are probably seeing a buy the rumor, sell the news scenario building up. Although GOOG's cash is up, their return on those assets will be down sharply, thus this could hurt earnings as well as a stronger dollar. I would be cautious on this one. The bar has been set too high!

Apr 16 08:27 AM