Google Continues Its Climb

Does it ever seem to you - it does me - that the Wall of Worry can often be a tiresome climb? I know that as Google (GOOG) climbs ever higher in price, news stories of this type proliferate.

The Washingtonpost.com reported that Nielsen/NetRatings has changed the way it rates Web sites, and in the process has upended the rankings of the top online destinations, vaulting AOL (TWX) and Yahoo (YHOO), over rival Google (GOOG). The research service announced on Tuesday that it would measure popularity by how long users linger on sites, not by how many pages they view, a move that could affect how online advertising works. Making the biggest leap, AOL moved to the No. 1 U.S. site, logging 25 billion minutes, according to Nielsen's May data.

If ranked by Web page views, AOL would be No. 6. GOOG dropped to fifth from third by page view ranking by minutes of use, at about 7 billion minutes. Jennifer Simpson, a senior analyst for Yankee Group, said the new rankings may prompt advertisers to change they way they present, and place ads. It could also hurt search engines like GOOG that generally serve as pit stops for users looking for something else.

This causes some bulls to worry. Peter Kafka (writing on Henry Blodgett's site) showers disrespect on this news, and I agree. Note that Google's march to higher highs continues...

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Despite the arguments, and wails and whines of the many investors who are not long the shares, GOOG's move to higher prices is resolute. The trend line delineates GOOG's trend, yes, but also its trajectory, and its continuum. Please recall that I last recommended purchase at ~$100/share lower than its current price based on its then-proximity to that trend line; I argued then that it represented value on a fundamental and valuation basis, but also on the chart. Which means that purchases made on that upward trending line (here comes a secret, sshh!) are safe, as even should the stock breach the line and begin a correction or, shudder, a bear market, there will come a test of former support (the upward rising trend line) which assures a profitable exit before lower prices set in. So why the need to worry?

Next up: Google's Q2 2007 Earnings Report is Due on Thursday, July 19th

GOOG announced that it will hold its quarterly conference call to discuss second quarter 2007 financial results on Thursday, July 19, 2007 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). The live webcast of Google's earnings conference call can be accessed at http://investor.google.com/webcast. The webcast version of the conference call will be available through the same link following the conference call.

Briefing.com reports that the brokerage firm of Thomas Weisel previews GOOG Q2 earnings (set for 7/19), saying that GOOG continues to take the search market share, and extend its lead in monetization innovations, and improvements in 2Q. Given that the stock has performed well in 2Q07, up 14% compared with the S&P that was up 6% during the same time period, the firm believes investors are beginning to look at emerging categories of revenue growth including mobile, display, and video.

The firm expects $2.69 bln in 2Q07 net rev (up 6.0% q/q and up 61.1% y/y), compared with First Call, which is expecting $2.67 bln (up 5.3% q/q and up 59.9% y/y). The firm also expects currency could add nearly $123 mln in gross revs in 2Q, and provide 7.2% lift to Google's international operations on a y/y basis. Despite these industry-leading expectations (they expect Yahoo!'s (YHOO) net search rev should be up 5.2% y/y), they believe investors continue to look toward new avenues of growth at GOOG. The firm likes YouTube's upside potential in terms of rev, suggesting that should GOOG begin to advertise in-stream, the co could reasonably start to see $500 mln a quarter in ad rev.

Oppenheimer also notes that GOOG reports on Thursday, July 19, after the market closes. The firm is estimating net rev of $2.69 bln, EBITDA of $1.69 bln, and pro forma EPSof $3.63 vs. Street at $2.67 bln, $1.66 bln, and $3.58 in rev, EBITDA and proforma EPS, respectively. The firm's net rev est for June quarter implies Q/Qgrowth of 6% vs. Street at 5%.

The firm thinks that GOOG's ability to come out unscathed post MSFT's launch of Vista, and YHOO's launch of Panama muted the risk perception of the likelihood of Google losing its market share in search, contributed to the upsurge of the stock's price in the last three months. The firm's above-Street 07 estimate reflects a positive view to generate revenue from Video advertising, to continue to improve search monetization, and to gain a greater market share in search queries.

Full Disclosure: The author is long the shares of GOOG.

Comments

[East Coast]

Nice article. Forget about AOL and Yahoo, all one needs to look at is the conversion of the word "Google" from a proper noun to a verb and the image transformation from "a nice option for search" to "the one stop to find out about anything I don't know."

[MNRTrading]

Google's plan for the next 3-5 years is firmly in place and working. DD revenue growth is built into their business model and expansion into new sources of revenue is as yet unchallenged. For a complete overview see:

mnrtrading.blogspot.co...