If you are a long term investor the best opportunity to buy a growth stock is on a market dip and that opportunity may be presenting itself right now in Google (GOOG). The market hasn't been kind recently but the stock is responding in this recent 2 day rally. If you examine this hourly trading chart provided by Barchart you can see the stock bounced off a recent downward trend:
Even though the stock has reported decent results during the past 6 months the stock is down around 13% compared to the 3% increase of the market as represented by the Value Line Index:
Google Inc., a technology company, maintains an index of Web sites and other online content for users, advertisers, and Google network members and other content providers. It offers AdWords, an auction-based advertising program; AdSense program, which enables Web sites that are part of the Google Network to deliver ads from its AdWords advertisers; Google Display, a display advertising network that comprises the videos, text, images, and other interactive ads; DoubleClick Ad Exchange, a real-time auction marketplace for the trading of display ad space; and YouTube that provides video, interactive, and other ad formats for advertisers.
The company also provides Google Mobile that optimizes Google applications for mobile devices in browser and downloadable form, as well as enables advertisers to run search ad campaigns on mobile devices; and Google Local that provides local information on the Web. In addition, it offers Android, an open source mobile software platform; Google Chrome OS, an open source operating system; Google Chrome, a Web browser; Google+ to share different things online with different people; Google TV, a platform for the consumers to use the television and the Internet on a single screen; and Google Books platform to discover, search, and consume content from printed books online.
Further, the company provides Google Apps, a cloud computing suite of message and collaboration tools, which primarily includes Gmail, Google Docs, Google Calendar, Google translate, and Google Sites; Search Appliance, a search technology for use within enterprises; Google Site Search, a custom search engine; Google Commerce Search for online retail enterprises; Google Maps Application Programming Interface for businesses; and Google Earth Enterprise, a firewall software solution for imagery and data visualization. Google Inc. was founded in 1998 and is headquartered in Mountain View, California. (Yahoo Finance profile)
Factors to consider:
Barchart technical indicators:
- Technical sell signal can be buy signals for long term investors that have growth stocks on their watch lists
- 72% Barchart technical sell signal
- Trend Spotter sell signal
- Below its 20, 50 and 100 day moving averages
- 13.59% off its 1 year high
- Relative Strength Index 41.36%
- Barchart computes a technical support level at 560.01
- Recently traded at 578.68 with a 50 day moving average of 611.98
Fundamental factors:
- Widely followed on Wall Street where 34 firms have assigned 41 analysts to write about the Company's numbers
- Analysts predict earnings will increase 21.60% this year and another 19.20% next year
- Earnings are estimated to increase 20.20% this year, an additional 16.50% next year and continue to increase annually by 17.85% for at least 5 years
- These consensus numbers resulted in 15 strong buy, 19 buy, 7 hold and not a single under perform or sell recommendation to clients of the brokerages
- If the numbers happen analysts look for investors to receive a total annual return in the 18% - 22% range over the next 5 years
- The P/E ratio of 32.96 is twice the market P/E of 14.40
- Although the market dividend rate is 2.40% GOOG pays no cash dividend but will issue a stock dividend of non-voting Class C stock on a 1 for 1 basis. Not technically a stock split.
- The Company has an A++ financial strength rating
- The recent quarterly report highlighted a 24% increase in sales and a 59% increase in earnings.
- Although paid click numbers were up 39% the net addition to revenue for paid click advertising was up only 22% due to advertisers choosing cheaper click rate
General investor interest:
- I gauge individual investor interest by looking at the readers of Motley Fool.
- On the site 17,691 readers have expressed an opinion on the issue
- General readers voted 86% that the stock will beat the market
- The more savvy All Stars voted 89% for the same result
- Nearly every brokerage firm and Wall Street columnist was positive on the stock
- R W Baird, Hilliard and Goldman Sachs are positive as is Jim Cramer
The market is the best score card and during the past year the stock has held up well against its competition. While Baidu (BIDU) was down 5% for the year, Google was up 12% during the same period. Similar Internet stocks like Amazon (AMZN) was up 16% and eBay (EBAY) up 36%:
Summary: Google is a growth stock as is evidenced by double digit projections of both revenue and earnings increases. The best time to buy a growth stock you've been watching is during a dip before the recovery. That opportunity may be now. Look closely at the 20 day moving average and the lower 14 day turtle channel to see if you agree:
