Say Goodnight as Google Disappoints

The leading stock of this bull market, the darling of all bulls everywhere, Google, reported earnings after the close on Thursday, and is now getting crushed.

Google is pretty much synonymous with this bull market. If its run is over, then this old bull is surely dead. Say Goodnight.

Stocks like Apple (AAPL), Google (GOOG), McDonald’s (MCD) haven’t really been hit too much yet. But they will. They’ll be the last to go. But when they go, they’ll go hard.

- “The Big, Popular, Growth Stocks Will Get Hit Last”, Top Gun FP, Friday January 11th

Here’s where Apple and Google were trading when I wrote the above on Friday, January 11th, after the market closed:

AAPL $172.69

GOOG $638.25

And here’s where they’re trading now:

AAPL $135.36 - down 21.6% in less than 3 weeks

GOOG $521 (in the after hours) - down 18.4% in less than 3 weeks

Google reported EPS not including stock options expense of $4.43, while analysts were looking for $4.45. Revenue after traffic acquisition costs (what the company shares with its partner websites) was $3.39 billion, while analysts were looking for $3.45 billion (GOOG 4Q Earnings Release).

Google shares were off about 7.5% in the after hours to the low-$520s.

Google missed. Google DOESN’T miss. The tide has clearly turned.

Comments

[Long-ShortGuy]

Couldn't agree more -- when the leaders miss, the market is heading down.

[Adam Sharp]

They don't issue guidance, who cares if they missed analyst avgs by .02?

I just read over the entire earnings call. Sounds like they had to pay Myspace or another partner site at a loss, because of guaranteed minimum payments written into the contract. They won't make that mistake again, I would imagine.

Still incredible growth and potential in core business, international, mobile, apps for enterprise, etc etc. Microsoft/Yahoo cannot be considered a serious threat until they get their sh$@ together.

[haydete]

As a user, Google feels good.

Can you imagine a "Vista" version of Yahoo? Yuck.

[Rumpole]

I too agree with this article. It's much like the situation for GS in the financial sector.

[David White]

Given a possible Microsoft takeover of Yahoo, a Google downturn has much less meaning. Part of the reason is clearly that some people now envision Microsoft/Yahoo as the new likely search leader. This would take the premium away from Google. It should be hurt the coming of a more wealthy and more powerful competitor with a lot of market share. It should have little meaning for the markets. B

[Greg Feirman]

Google was getting hit way before the MSFT/YHOO deal. Plus, nobody seems to think that combination is much of a threat to Google - so it doesn't explain selling in Google.

I agree, Adam, that the fundamentals are good. But what this earnings miss and price action suggest is that the peak for this cycle is in. So while Google is still solid fundamentally, it likely will go lower before going higher.

Rumpole: Yes, I think GOOG and GS are the most important stocks in the market these days.