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Andrew O'Byrne

 
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  • Google's Roadmap To $1000 [View article]
    Hi lh2soda,

    Thank you for your comment. You make some constructive arguments, particularly point 2, and how Samsung is positioning itself for when Google will become a competitor rather than a partner.

    We have to give credit to Apple for how it is much better at getting its iPhone users to click on paid search ads. To be honest, I struggle to understand why Google is not more successful in getting the paid mobile clicks on Android. If you know, then please share. Nevertheless, you have to concede that by developing Android, it was a very clever way for Google to entrench itself on mobile and to gain a higher share of the profits from paid clicks. There is an uncomfortable symbiotic relationship between Google and Apple and Apple definitely has the upper-hand in commanding a very high share of the revenues generated from mobile clicks on iOS. You've highlighted a key operational challenge for Google in that it needs to do much better on Android with mobile search. As long as it relies on iOS for mobile, CPC will continue to be diluted.

    By entering into the handset business, Google has undermined its relationship with its Android partners but I believe it has taken a calculated risk. I find your comment that Moto X as "probably already DOA" as funny but you are not being reasonable. No one really knows but the probability of success is 50:50 in my view. I am not promoting the blue-skies scenario for Moto X but I think the management team has made the right decision. The Moto X will not be as good as the iPhone but Apple's challenge is to leap frog ahead of its peers. I am not saying Apple cannot do this with the iPhone 6, but judging by its share price, the market is skeptical. Apple is now a "show me" stock and will trade at an ex-growth valuation until it can get some of its magic back.
    Jul 13 04:37 PM | Likes Like |Link to Comment
  • Google's Roadmap To $1000 [View article]
    Hi wdchil,

    Yes I agree with you and Varadharajan that following the recent run up in the share price that a bad set of earnings would result in a sell off. You're right, this is a feature of every growth company on a premium valuation to the market.....and invariably, as long as it's just a temporary blip in the growth story, these are buying opportunities. I still firmly believe the secular growth story for Google and that the trajectory in the share price is up, albeit with a few setbacks along the way. I invest for the long-term and will be holding on to $1,000.

    I am not on here to obstinately put forward the case for Google. I hope my article comes across as balanced and I was outlining my viewpoint that despite the strong share price performance which has been driven by a rerating (low quality) and not upward earnings revisions (high quality), I think investors can genuinely be optimistic about Enhanced Campaigns. I do not have a crystal ball into the upcoming quarterly results, but I think there is a good chance that Enhanced Campaigns will be supportive.

    My other conclusion was that, as a long-term investor who seeks structural winners with visible growth, who else in the big-cap tech space provides a better fundamental story? I gladly welcome any suggestions.
    Jul 13 04:03 PM | Likes Like |Link to Comment
  • Google's Roadmap To $1000 [View article]
    I thought I would provoke a response by putting Google+ on "lucrative pipeline of opportunities". Of course I understand that Google+ is most likely never going to be a money-spinner, but I disagree that YouTube and Android are not attractive assets. The business model for Android is mobile paid search. It can embed Google search on Android devices and earn a much larger share of the paid click. We know a lot of money is generated from Apple mobile paid search which is powered by Google but Apple take the majority of this revenue. Android is a quid-pro-quo for Google and third party handset manufacturers where Google gets the paid search and the handset manufacturers do not have to pay large license fees and can attract developers to its own app store. As for YouTube, it has adopted a similar revenue share with high quality third party content suppliers and I suspect the litigation issues will quickly settle down. Most marketing executives at large corporations are seriously considering YouTube for part of their budgets.

    I found your comments interesting though that there is a culture at Google to encourage false clicks for revenues. If this is the case, then this would be concerning as raising ROI is the only way to increase CPC.
    Jul 12 11:13 AM | Likes Like |Link to Comment
  • Google's Roadmap To $1000 [View article]
    MSFT was also on a 70x P/E in 1998.

    The difference to Apple is the visibility of the growth. The handset market is fickle and we've seen practically all the handset companies fall from grace. (e.g., Nokia, RIMM, Motorola, HTC, Sony, LG). Google's dominance of paid search and most other online advertising platforms is entrenched. The truth is, Apple use to have an economic moat when the iPhone was much more superior than any other phone on the market - not the case anymore.

    Yes I like a higher FCF yield. But I admit the rerating story has played out.

    Stabilization in CPC is key and could lead to earnings upgrades next year.
    Jul 12 10:16 AM | Likes Like |Link to Comment
  • Google's Roadmap To $1000 [View article]
    I agree that a 19x multiple is not sustainable year-in, year-out but if Google can grow its 2013 EPS by 15% per year for next three years, it will have a $70 EPS. At a $1,000 share price, it will therefore be trading on 14.2x 2016 earnings. Let's not forget the huge cash balance and optionality in Motorola, Android, and YouTube. I think 15% EPS growth is assured given secular growth in eCommerce and its economic moat is very wide. It may not be a straight-line to $1,000 from here but it should get there.
    Jul 11 01:44 PM | Likes Like |Link to Comment
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