THE GOOGLE INVESTOR: Wall Street Frets That Strong Quarter Already Priced Into Stock

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Google cofounder Sergey Brin

Photo: AP

GOOG Letting Go Of Some Gains
The stock shot through its resistance yesterday, gaining an incredible $14 seemingly out of the blue (Wall Street expectations for the quarter are running high).  Google reports earnings tomorrow and all eyes will be on the Internet and technology giant for guidance as to how the rest of tech might fare.  Potential near-term catalysts include March quarter earnings this Thursday, Android adoption; and benchmarks surrounding newer initiatives, which have mostly been disappointing. As search matures, Google has yet to develop a strong second growth engine. The stock trades at a pricey 21x 2010 EPS and 19x Enterprise Value / EBIT.

Wall Street Gears Up For Google Earnings Tomorrow (Forbes)
Google will hold its quarterly conference call to discuss results tomorrow at 1:30 pm Pacific Time (4:30 pm Eastern Time).  The Street expects Q110 to be slightly better than Q409:

  •  BGC Partners’ Colin Gillis believes that Google will report solid results on Thursday, but that a strong quarter may already be priced into the stock. He is below consensus at $6.5 billion in revenue and $6.38 EPS with 35.5% operating margin. Gillis maintains his Hold rating on the stock with a $580 price target.
  •  MKM Partners’ Tim Boyd thinks consensus estimates are reasonable, but believes that increased antitrust risk will be an overhang on the stock. He maintains his Neutral rating and $570 price target.
  •  Goldman Sachs derivatives analyst John Marshall believes that GOOG April options are attractive ahead of earnings. GOOG April $590 straddles cost only 4.3% compared to the average earnings day move of 6.8% and median move of 5.6% (the last two years). 

Google Needs To Step It Up For Android To Survive And Pray Verizon Doesn’t Get The iPhone (Seeking Alpha)
Google bear Jason Schwartz believes the following things must happen in order for Google’s Android mobile platform to have a fighting chance: 1) Apple needs to remain exclusive to AT&T (not likely); 2) Android Market needs to drive more sales; 3) Android devices need to make enough revenue to make it worth the manufacturers while; and 4) Google needs to simplify the manner in which developers can develop across the 165 devices that support Android. While we generally agree, in the past three months, Android has more than doubled its share of the mobile market to 9%. Google’s doing something right.

Google Docs, The Microsoft Office Killer, Gets An Overhaul (Business Insider)
In its effort to drive cloud computing and take on Microsoft (perhaps Amazon too), Google has revamped Google Docs. Major changes include: word processing, new spreadsheets, live collaboration and a picture tool (like Microsoft Paint). There is a lot of emphasis on collaboration in these updates and most simply look like Google Wave. Obviously, the world has yet to get as excited about Wave as Google hoped. Now, everyone who shares Google Docs is using Google’s real time collaboration tool whether they like it or not.

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