Google Earnings Preview

The bar has been set low for Google over growing concerns about the internet giants exit from China and their inability to develop new revenue streams.

 

Google [[GOOG]] is scheduled to report their second quarter 2010 results after the market closes on Thursday, July 15.

 

Google stock has suffered mightily since announcing in January that they would exit the China market. That announcement has greatly benefited Baidu, which has seen its shares jump 83% since then. Investors should be encouraged that China did renew Google’s web license to enable them to maintain at least some exposure to the key Chinese market.

 

Google has managed to deliver higher-than-expected earnings results each of the past four quarters. Last quarter, the internet stock reported earnings results that were $.16 above Wall Street’s consensus estimates. However, GOOG shares plunged over 7% the next day as investors were hoping for stronger results.

 

The current Wall Street consensus estimates are for revenues of $4.99 billion and EPS of $6.54. This would imply a 22% increase in revenues over last year’s $4.07 billion. Analysts also expect a similar increase in profits. 

 

It’s been a rough year for Google so far. Their stock price has fallen 25% and has underperformed internet peers like Yahoo [[YHOO]], Amazon [[AMZN]] and Baidu [[BIDU]]. Last year GOOG shares more than doubled to easily outpace the 44% gain in the Nasdaq index.

 

Google stock is currently trading at 15x consensus 2011 EPS estimates. Google has continued to monetize their core business quite well, but investors are really searching for a catalyst to show that the company is more than just a “one trick pony”.

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