In my opinion, GOOG will disappoint whether they beat or miss. The reason, their growth rate is slowing. I know it's fast in comparison to many other companies, but the momentum guys don't care, they want steady, accelerating growth. GOOG is decelerating due to it's size. And it's all about the percentages.
why do you suppose the stock hasn't moved in the last yr? Look at Jan 11 06's price. Same as today. (actually 5-10%+ cheaper today if you count inflation and USD weakness) Old news. Your opinion only explains the past prognosis. Google has plenty of upside here, and slowing growth is priced in. The question is if its priced in too much or too little. Right now with a PEG of 1.0 (very cheap with no premium) the market is pricing in 25% annual growth over the next few years. Analysts are expecting 30%+, so there's an easy 20% upside on the stock. To give you a contrast, KO (coke) has a PEG of 2.6. 3x more expensive than google, and its growth rate is 6-8% forecast annually. Coke commands this premium because its almost a sure bet in times of currency weakness as well as potential economic slowdown - the multiple is expanded as people fly to safety. I guess a 2.7% divvy is enough to persuade people that its acceptable. I consider this such an illusion, as the expectation of return increases broad multiples contract, and a PEG of anything above 1 in tough times just doesn't cut it in my view. In a hyperinflative environment (look early 80s) where bonds return 10%+, why pay such a premium for 2.7% return with so little downside and nil growth prospect? Flight to safety in equities is an illusion at these prices. On the other hand (devil's advocate), in a hands down recession what is the risk of Coke having negative growth versus Google? [people drink coke regardless, but returns on ads may falter enough to keep advertisers keeping them bid up] Many argue that google isn't as vulnerable to cyclical depressions as other tech/growth businesses, but thats a whole different discussion. Coke, P&G, etc. command this high premium because of this. My take is if you're preparing for tough times, get out entirely, go cash, or even buy bonds. Why keep 2-3 PEG growth stocks through market tops... ??? The better shorts on the Dow are Dupont, and anything that would be weak in an economic slowdown with already high PEGs.
All this got me thinking. I'm pretty bullish in general, but I always like a good short or two. MCD and KO look like the two best shorts on the Dow. MCD is at all time highs and both seem to be up on USD currency weakness. I'm getting bullish USD now... and like some shorts to offset my longs.
yea rational doesn't describe these markets. by all past measures, we should've had a nice big selloff today. but then you have options expiration and NOT enough sellers. I just went short KO and MCD today. Long AAPL GOOG, etc.
Google has morphed into a slow moving behemoth, vastly overpaying for assets, based on an already outdated business model. Whenever you see acquisitions such as doubleclick and youtube for the prices paid, it's a GINORMOUS rd flag. The death of search. Circa 2007. RIP, Google. Gotta go put my shorts on now.
google response looking suspiciously muted like ebay yesterday. Funny how QQQQ keeps soaring, while reporting components are fizzling.