Seeking Alpha
Long/short equity, value
Profile| Send Message|
( followers)  

Google (NASDAQ:GOOG) has moved up nicely before earnings, very similar to last quarter, and looks like it could surprise to the upside again. The fundamentals in the chart below show how attractive GOOG is, despite a recent analyst downgrade and the failure of the 50-day uptrend, while the 200 day remains in a downtrend. The fundamentals on the chart below show why GOOG is so attractive, compared with Amazon.com (NASDAQ:AMZN) and Salesforce.com (NYSE:CRM), which are extremely overvalued. ( Note that AAPL beats them all, both fundamentally and on a 50-day or 200-day price trend basis.)

PE FPE PEG P/S P/FCF REV TGT RTN% 50D 200D
GOOG 20 13 1.0 5 22 DN 718 30 SIDE DN
AAPL 16 12 0.7 4 13 UP 550 35 UP UP
AMZN 104 71 4.0 3 59 UP 280 16 UP UP
PCLN 35 17 1.3 7 26 UP 621 25 SIDE UP
CRM 638 72 24 9 319 DN 155 18 DN DN

GOOG's PE based on forecasted earnings (FPE) certainly looks like a bargain compared with the current PE and the PE vs growth (NYSE:PEG). Both the P/S and P/FCF look in line compared with the others. Latest analyst revision (REV) is down (DN), which is surprising considering the move up in price in the last week. The implied return (RTN %), based on the 12-month target and current price looks attractive. (And there are analyst targets higher than this, out there.)

The key problem with GOOG is price trends. The long-term, 200-day price trend is still down. After the last earnings report, price shot up above this trend, a definite positive. And the 50-day downtrend turned up, another positive. But since the last earnings report price has, again, dropped below the 200 day. And the 50 day has faltered so we show it as a sideways (SIDE) trend in the above data. More importantly the 50 day has not yet broken above the 200, to indicate a change in trend. That is why these earnings are so important, to confirm GOOG's ability to reach the 12-month target (TGT) shown above.

CONCLUSION: Based on last month's positive surprise, and the attractive fundamentals shown above, as well as the price run-up before earnings due on Thursday, expect GOOG to make another attempt to push price above the 200-day moving average with some more good news. Obviously, there was selling into strength after last quarter's pop-up in price. We can see that on our Flow of Capital chart, but money flow is still positive for GOOG, despite the sellers. Our fundamental models, at StockpickerUSA.com, rate GOOG a "buy." Thus, both fundamentally and technically, GOOG looks attractive going into the earnings announcement.

Disclosure: I am long SDS.

Source: Google Could Surprise To The Upside Again