THE GOOGLE INVESTOR: Investors Looking For A Big Quarter

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larry page shrug

Dylan Love

GOOG Falling After Strong Open
The market is bouncing back after a mid-morning dip. Philly Fed numbers missed expectations as jobless claims plunge. Shares of GOOG opened strong and have been falling since. Catalysts include fourth quarter 2011 financial results released tonight at 4:30 p.m. ET; continued Android momentum in the smartphone and tablet markets worldwide; Motorola acquisition approval and integration; regaining ground in China; resurgence of Google TV; the roll-out of Google Music, social network Google+ and Google Wallet; and progress in other newer initiatives (location-based services, mapping, gaming, daily deals, etc.). The stock trades at approximately 12.8x Enterprise Value / EBIT.

Google Reports Earnings Tonight After The Close (Silicon Alley Insider)
Join us for LIVE coverage and analysis of Google’s holiday quarter earnings announcement. Consensus expectations are revenue of $8.38 billion with earnings of $10.46 per share.

Quarterly Preview: What The Analysts Are Saying (Various)
Wall Street weighs in:

  • Morgan Stanley: Analyst Scott Devitt is looking for net revenue of $8.4B, adjusted EBITDA of $4.5B, and adjusted non-GAAP EPS of $10.16. He expects some discussion of core search trends but the bulk of management commentary will focus on newer initiatives: “Search plus Your World” social integration, Android activations, mobile revenue, performance display and video advertising formats. He maintains his Equal Weight rating and $642 price-target.
  • Citigroup: Mark Mahaney is looking for $8.30B in net revenue (up 27% year-over-year and 10% sequentially) and $10.52 in non-GAAP earnings. He sees risk to revenue due to significant sequential foreign exchange (FX) headwinds given significant (50%) international exposure. He believes the core search still has robust, sustainable growth and that newer growth drivers (mobile, display, YouTube) are all becoming more material. He maintains his Buy rating and $680 price-target.
  • Deutsche Bank: Analyst Jeetil Patel is a buyer and comfortable with his current estimates for +10% sequential and +30% year-over-year net revenue growth despite mixed commentary around European search spending and FX headwinds. Investors should not expect dramatic upside as a result. In terms of Motorola, he is a believer in the strategic rationale for vertical integration and reducing reliance on distribution partners for mobile search. But execution will present enormous challenges. He maintains his Buy rating and price target of $645 per share.
  • Bank of America Merrill Lynch: Justin Post expects solid results (+26% ex-FX revenue growth) driven by paid click upside on vertical search improvements and mobile strength. Europe is a potential offset due to macro weakness and FX. He expects a muted stock reaction with modest changes to 2012 estimates. Stock issues won’t likely get a lot of clarity on the call. He maintains his Buy rating on attractive growth versus valuation.

Sounds like a possible snoozer.

Apple Closing The Gap On Android As Smartphone Market Share Nears 50% (Nielsen)
According to Nielsen, the launch of the iPhone 4S had an impact on the proportion of smartphone owners who chose Apple. Among those who said they got a new device within the past three months, 44.5% said they chose an iPhone in December, compared to just 25.1% in October. Android continues to hold the lead among all smartphone users, with 46.3%. As of last quarter, 46% of U.S. mobile consumers had smartphones, a figure is growing quickly.

Investors Loading Up On Google Calls (Reuters)
Investors’ optimism for Google is running high, setting the stage for another jump in its shares to an all-time peak. Options investors appear to be betting on more gains for the stock, purchasing Google calls, which grant the right to buy the stock at a fixed price up to a certain date, at a greater pace than its puts (or rights to sell the stock at a preset price) heading into earnings due after the market close on today.