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Google Still Has A Lot Of Room To Run

|Includes:Alphabet Inc. (GOOG)

Google's recent earnings report provided enough to feed both the bulls and the bears. But the little things tell me that the company still has a lot of room to run. Here are some particular things I'm looking at looking forward:

  • The company's reported revenue grew 22% year-over-year to $15.96 billion, beating consensus estimates of $15.61 billion. Despite the miss at the bottom line, there remains a strong foundation.
  • Google is continuing to strengthen its hold in the everyday household with a slew of acquisitions. The latest and greatest being Dropcam, which Google's Nest Labs announced a purchase for $555 million, and Songza.
  • Google is teaming up with Novartis to develop a smart contact lens to help diabetics monitor their glucose levels. Not only does this open up the opportunity for billions in revenue from that market alone, but they should also be able to expand the function of the lens to monitor other vital signs.
  • Google's forward PE ratio is 19.3, which offers a compelling reason to own shares at current levels.
  • "Other Revenues" was up 53% year-over-year with CFO Patrick Pichette telling analysts that digital sales from apps and content in Google's Play Store driving the growth.
  • An outside estimate shows that YouTube earned $3.5 billion in revenue in 2013. Although executives wouldn't comment on the estimate, Nikesh Arora said, "Our monetisation model in YouTube is working. It's a phenomenal model. It is now the linchpin of each of our brand strategies if our partners and advertisers want to come work with us to create brand campaigns."

One thing to pay attention to, though, is their search ads, where the average cost per click (NYSE:CPC) declined 6% during the quarter. They also face stiff competition from Facebook, who cut a significant chunk out of Google's market share in 2013, jumping from 9% in 2012 to 15.8% in 2013, contrasting Google's drop from 50% to 41.5%.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: GOOG