Google Earnings Preview: Strong Quarter Already Priced Into Stock

Google cofounders in 1998

Google (GOOG) reports Q309 earnings after the close today.  The call will be at 4:30 PM EST.  We’ll be analysing the earnings live here, starting at 4pm.

The Bottom Line: With GOOG shares up about 20% in the past month, the market is already counting on strong results.  Specifically, the market expects the company to beat consensus estimates of $4.23 billion in revenue (whispers $4.3-$4.4 billion) and $5.39 in EPS (whispers $5.70). 

Most investors are expecting sequential revenue growth in the mid-single-digits.  Anything below that, or unexpectedly weak Q409 guidance will probably hammer the stock.  We think the most likely scenario is that Google hits the whispers and says Q409 is looking slightly better than Q309 (but not much).

Background: At $535 the GOOG shares are trading at about 24 times 2009 P/E, which is below historical levels of about 30-times, but still pretty rich for a company this huge.  The shares likely price in a modest recovery in 2H09 with continued growth into 2010. 

Key Consensus Estimates:

  • Net Revenue $4.23 Billion ($4.4 whisper)
  • Non-GAAP EPS $5.39 ($5.70 whisper)
  • Non-GAAP Operating Income $2.28 Billion  

Here is a snapshot from Citi analyst Mark Mahaney:

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