The point of this article is to highlight four reasons why we think now is a good time to sell Google (GOOG) if you hold some shares.
1- Google still makes less money than Samsung on Android despite attempts at revamping the Play store and changing the licence terms. (term change)
2- Google directors and board members have been reducing their stakes for a while and in the last six months. 70% of shares held by insiders have been sold.
3- Technical analysis shows Google is on its way back to below $850 range.
4- No company can grow rapidly once they are a $300 Billion dollar company as Apple has shown. Google is worth $290 Billion dollars when it was trading at $877.
Android is not making so much money
Even though Android is the most popular smartphone operating system, it is making more money for Microsoft (MSFT), via patents, and Samsung via handsets than for Google (See Zdnet article).
Even though three Android phones are now sold for every iPhone, Google has still yet to fully figure out how to leverage the open system to its advantage. While Android has been great for handset makers, especially Samsung, it's failed to advance the Google ecosystem as much as hoped or make much money. "Ironically, in some cases Microsoft may be making more money off Android than Google, because of patent payments," said Gartner analyst Michael Gartenberg. In other instances, Android has completely run away from Google. Amazon's Kindle Fire is built on Android, but you'd never know it - and the Amazon app store competes with Google's. (The Verge)
Directors reduce their stake
The insiders and Google founders have all been reducing their stake in the company despite recent all-time highs. Directors are not good at picking the top, but their selling can indicate long-term valuation bubbles. If they were all buying the stock, we would be more confident in ignoring the fundamentals. According to Yahoo Finance, 70% of all shares held by insiders, have been sold over the last six months.
Bleak technical picture
I think the chart speaks for itself. It hit a recent peak of $921 and has been on a general fall since. Furthermore, the bounce back from the $850 support level two weeks ago was lower than the high achieved in May 2013. This indicates it could continue to break down through the $850 support level in the near future.
Google's growth flattening
Finally, it is worth mentioning Google does not look cheap with a market cap of nearly $300billion dollars as well as having a high P/E ratio. Sustaining high growth is not feasible for very large companies. Furthermore, Google only takes in about 7% of advertisement revenue in China. A simple measure of growth in actual cash flow, shows that 2011-2012 cash flow increased by less than 10% while previously it increased by 25%. By the end of this year Google cashflow may even flatten due to competitive pressures. (see source).
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in GOOG over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.