Google: Buy Or Sell?

| About: Alphabet Inc. (GOOG)

Google Outlook Unaffected by Unemployment

As the share price for the American search engine behemoth Google (GOOG) continues to remain uncertain, down 1.7 percent ($-9.88) amid US & European unemployment numbers, the long run outlook among top analysts remains positive. According to S&P recommendations the company is listed with a 'hold' rating, with an estimated twelve month target price gain of 104.02 points, from 570.98 to 675 points. The S&P remains confident that the company is projected to grow 23 percent in the year 2012 alone based on the growth of online pay per click ads.

Investors planning to bet on short-term gains based on growth in the Chinese market should be cautious about Chinese regulations and state run Baidu (BIDU), amid concerns of search result manipulation. The company's overall search market share has dropped to 17 percent, from 35.6 percent.

Lawsuits & Acquisitions

Despite critical news from the press about the acquisition of Motorola and impending lawsuits from Apple (AAPL) and Microsoft (MSFT), Google posted net income growth of 60 percent, to $2.88 billion, from $1.8 billion the previous quarter one year ago. Additionally to incentivize both employees and investors, the company has announced what effectively is a two-for-one stock split, the first of its kind since going public. For existing shareholders, now would be the time to hold as the split technically represents a dividend on the basis that shares will be non-voting.

Industry Growth

Our overall view of industry growth for the next 12 months remains positive, to the effect that emerging markets and a stabilizing global economy will make an effective contribution to Google's bottom lines. Global ad revenues for online pay per click ads have shown growth accelerating by 3 percent in 2009, 15 percent in 2010, and 22 percent in 2011, with a projected 10 percent growth in 2012. Standard & Poor's believes the US market consists of 30 percent of that growth. With the growth of the smartphone market expected to continue and with Google maintaining the default search engine on many devices (primarily its own Android operating system), ad revenue could exceed expectations without shock.

Analysis Buy, Sell, or Hold?

Based on the information from the S&P and first quarter earnings, I remain confident in recommending Google as a long term investment for the coming 12 months, and recommend a hold for large investments. With the development of the mobile web and processing power moving to The Cloud, it is expected that more opportunities for ad revenue will present themselves as new cloud services emerge. Already on the fly, conversion of documents, photo editing, and film editing are available via Google services and cloud rival software from Apple, Adobe (NASDAQ:ADBE), or Microsoft. These cloud based services based on Google's previous models are expected to be offered free to consumers and should earn large install bases, generating large ad revenues.

In direct comparison with competitors like Facebook (NASDAQ:FB) which had a rough public start, losing nearly a third of its original opening price,

Google has managed to generate revenue and maintain its strong lead over both the above and Apple's iAd platform. There are no immediate concerns of rivals significantly gaining ad revenue share to the company's existing or growing record. The challenge now seems to be who can maintain an edge on cloud computing services and data collection.

I do not foresee a company making major gains on any other's core products or business models in the next 12 months. For example, Apple made its first foray into the social market with Ping, an online social media platform for iTunes (that allowed users to share music likes and interests), to little fanfare and an unannounced user base. Also, despite Microsoft integrating Facebook Likes into the search results of Bing, the service has had little luck in leveraging the social network to compete with Google's preferred social platform Google +, which enjoys premier placement in search results. As of today, the market share between Google & Bing remains a 30, 70 percent split with Google taking the lead. In my opinion, you must hold it for long term; avoid short term pitfalls and short news cycles.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.