By Brendan Gilmartin
Google (GOOG) is scheduled to report Q2 earnings after the close of trading on Thursday, July 19. Results are usually available in the minutes after the closing bell, with a conference call slated to get under way at 4:30 p.m. ET. The S&P E-Mini, Nasdaq 100 E-Mini futures contracts, and PowerShares QQQ (QQQ) tend to see active trading off the results. (Google is fourth biggest holding in the QQQ.)
Outliers and Strategy
- Google is expected to earn $10.05 per share (on a non-GAAP basis) on revenue (ex-TAC) of $8.41 billion. The high estimates on the Street are $10.53 per share and $8.71 billion, respectively. (Source: Yahoo Finance.)
- On May 22, Google announced it closed the acquisition of Motorola Mobility Holdings, Inc. It's therefore likely that the results from Motorola Mobility will be included in Google's actual results. However, the Street is more likely to focus on the separate financials related to Google's traditional businesses.
- July 18: According to a post on Barrons.com, ThinkEquity reiterated a Buy rating on Google with a price target of $722. The firm expects overall paid click volume to support advertising growth, mitigating weakness in cost per click.
- July 17: Oppenheimer maintains an Outperform rating on Google, according to StreetInsider.com, but is somewhat cautious. The firm is reportedly concerned over the impact of the Motorola Mobility acquisition, the health of CEO Larry Page, currency headwinds, and a more tepid macro backdrop.
- July 13: Wedbush initiated coverage on Google with a Neutral rating and a price target of $640, according to a post on Benzinga.com. The Neutral rating is due in part to risks of higher OpEx growth given the growing competition in search.
- July 2: According to Comscore.com, Google Android ranked as the top smartphone platform with 50.9% market share for the three months ending in May. This is up 0.8% from February 2012.
- June 26: Morgan Stanley initiated coverage on Google with an Equal Weight rating and a $625 price target, according to Barrons.com. The moderate view was based on concerns over profit contributions from mobile ads vs. the desktop and competition from social media platforms. The firm also sees Q2 non-GAAP EPS of $9.80 and revenue of $8.3 billion, below consensus estimates.
Google shares recently slid to the lowest level since last October, but established solid support in the $560 area. Watch this level in the event of a disappointing earnings release, with potential downside risk to the $550 level. Conversely, the shares recently bumped up against $580 resistance (previous support), with potential to reclaim the SMA near $600 in the event of a positive earnings surprise.
Chart courtesy of StockCharts.com.
Google shares are off more than 10% from the April highs and the level leading into the previous release amid concerns over slower advertising growth stemming from the weaker macro backdrop, the impact of the Motorola Mobility acquisition, recent dollar strength, increased competition in search, and the push toward mobile ads. But with the recent weakness, a forward PEG ratio of 0.95 (<1.0 is significant) and shares trading at just 3.8 times cash, downside could be limited, barring a steep miss.
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