Google Earnings Preview: Pray For Upside

Google (GOOG) reports Q1 earnings after the close.  Please join us here for LIVE COVERAGE of the results and conference call starting at about 4:15PM ET.

Our Bottom Line: Q1 estimates have dropped significantly and are now very conservative, so Google should beat them.  If it doesn’t, look out below. “In-line” results won’t get the job done: The stock has had too big a run to sustain the current price without a material upside surprise.

Background: At $385, Google’s stock is trading at about 18X trailing free cash flow of $5.5 billion (Enterprise Value/FCF).  That is a bit expensive for a company this size, and it reflects a consensus that Google’s growth will reaccelerate in the second half of 2009 and especially through 2010.  We think the 2009 and 2010 estimates are still too high, so the downside probably outweighs the upside here.

Key Stats (Consensus):

  • Net Revenue (Gross – TAC): $4.08 Billion
  • Pro-forma Operating Income: $2.02 Billion
  • Adjusted EPS: $4.90
  • GAAP EPS: $4.17

See Also: LIVE ANALYSIS of Google’s Results Starting At 4PM ET

Here are Citi analyst Mark Mahaney’s estimates, which are slightly below the Street consensus:



And here’s Mark’s analysis of how the stock has performed after previous quarterly releases:

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at