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Brendan Gilmartin
Google (GOOG) is scheduled to report 3Q earnings after the close of trading on Thursday, October 18. Results are usually available in the minutes after the closing bell with a conference call slated to get underway at 4:30 p.m. EST. The S&P E-Mini, NASDAQ 100 E-Mini futures contracts, and PowerShares QQQ (QQQ) (GOOG is 4th biggest holding in the QQQ) tend to see active trading off the results.

Google is expected to earn $10.54 per share (on a Non-GAAP basis) on revenue (ex-TAC) of $11.87 bln. The high estimates on the Street are $13.00 per share and $12.94 bln, respectively. (Source: Yahoo! Finance)

After bottoming out near $560 in July, Google shares are up more than 30% after recently touching an all-time high of $774.38 as recently as October 5. Despite the run-up, Google is trading at just 22.1x trailing earnings for a Forward PEG ratio of just 1.18.

Recent News

  • 10/15: Oppenheimer raised its price target on Google from $752 to $800 in anticipation of strong 3Q earnings, according to a report on StreetInsider.com. The firm is anticipating net revenues to be 4% above consensus and maintains an Outperform rating.
  • 10/15: According to a post on Barron's, Piper Jaffray reiterated an Overweight rating on Google and increased the price target from $717 to $834. The firm also sees revenue of $11.93 billion and EPS of $10.73, above current consensus views, thanks to strength in the core Google business, offsetting modest declines in the Motorola Mobility segment.
  • 10/11: Nomura raised its price target on Google from $770 to $900, according to a post on StreetInsider.com, and maintained a Buy rating. The firm sees 3Q results coming in 2% above consensus, due in part to emerging opportunities for ad dollars and strength in the YouTube franchise.
  • 10/11: According to a report from IAB, online advertising reached a record of just over $17 billion for the first half of 2012, although growth rates appear to be slowing. The report showed mobile advertising growth was up 95% to $1.2 billion.


Technical Review

Google shares broke out to all-time highs in the past several weeks, en route to an all-time high of $774.38 on October 5. From here, there is soft support at the 50-Day SMA near $707, with downside risk to $680 and $660 if earnings fail to meet consensus estimates. Conversely, resistance is at the recent highs. (Chart courtesy of StockCharts.com)

(click to enlarge)

Summary

Google shares recently broke out to an all-time high of $774.38, jumping more than 30% since its previous earnings release, with analyst sentiment nearing peak levels, following a slew of price target and earnings estimate hikes over the past several weeks. With that being set, the bar is set pretty high for Google which is seen benefiting from an improvement in ad spending, growth in YouTube franchise, mobile expansion and adoption of the Android operating system, and expectations for a strong quarter based on strength in the core business. With that being said, Google needs to deliver Non-GAAP EPS well above the consensus ($10.54) and closer to the high end ($13.00) in order to extend the 30% rally over the past three months. Conversely, earnings at or below consensus may be seen as a disappointment given the extent of the recent advance.

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Source: Google Near All-Time Highs Ahead Of 3Q 2012 Earnings; Sentiment Too