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GOOG Up Ahead Of Earnings
Markets are off today as the financial sector indicates troubles ahead. J.P. Morgan beat lowered expectations after weakness in the investment banking division, and Slovakia approved the EFSF expansion. Shares of GOOG are up ahead of earnings today. Catalysts include third quarter earnings announcement 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 in search and pushing forward in mobile; any signs of life for Google TV (including Motorola); 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 11.6x Enterprise Value / EBIT, inexpensive relative to historical trading levels.Join SAI For LIVE Coverage Of Google Earnings (SAI)
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What Wall Street Is Expecting Tonight (Various)
Consensus is $7.19 billion net revenue with and $8.74 non-GAAP EPS. The analysts weigh in:
- Stifel Nicolaus: Jordan Rohan reduced his rating on shares of Google from Buy to Hold stating that the strategic position of Google is weakening. The Motorola acquisition could distract senior management, fail to protect Android, lead Google into intensely competitive hardware business, and keep Google from returning capital to shareholders. The growth of search advertising has decelerated. Though valuation remains, attractive, upside will be limited.
- Citigroup: Mark Mahaney believes that operating expenses remains the wild card on EPS. Google is a “show me” story: 1) return on new investments are uncertain; 2) cost structure is still not convincingly under control; 3) loss of senior management talent is a concern; 4) significant regulatory risk; 5) Facebook; and 6) the pending Motorola deal is likely to serve as an overhang.
- Barclay’s Capital: Anthony DiClemente highlights things to watch for: 1) core search growth; 2) signs of macro impacting search spend; 3) share gains in display; 4) Android adoption; 5) updates on the pending Motorola acquisition; 6) product roadmap and investment spending; and 7) EBITDA margins.
- Piper Jaffray: Gene Munster believes Google will post a slight (1-2%) revenue beat. The Street focus has shifted to answering the question of “What happens to Google if there is a recession?” Google is not immune and it is likely Street estimates would need to be reduced. Also, investors are looking for what the MMI acquisition will do to margins. Operating margins could end up in the low to mid 30% range.
- Bank Of America Merrill Lynch: Justin Post believes that the company faces a number of overhangs into 2012 (possible media budget cuts, Android litigation, Motorola integration, Facebook) and these concerns could linger. Traction with new products could offset negative views on spending. Margins will take a large step down in 2012 with Motorola.
- Susquenhanna: Herman Leung believes quarterly results should come in better than expectations. He is looking for an update on the MMI acquisition, Google + social user metrics, strategy on Google Wallet and vertical build-out programs.
Not overly positive for the search giant.
Goldman Sachs Cuts Online Ad Spending Forecasts (Associated Press via Forbes)
The U.S. online advertising market is heading for a slowdown as a struggling economy crimps marketing budgets, according to a Goldman Sachs. Under its revised forecast, the U.S. online advertising to climb 10% next year instead of its previous projection calling for a 13% increase. For the current year, Goldman Sachs foresees a 14 per cent gain in online advertising. Not good for Google as advertisers decrease spending and what analysts and investors fear.
Google Could Surprise To The Upside Like Last Quarter (Seeking Alpha)
Google stock has moved up nicely ahead of tonight’s earnings, very similar to last quarter, and looks like it could surprise to the upside again. The fundamentals metrics show how attractive financial performance is, despite a recent analyst downgrade and the failure of the 50-day uptrend, while the 200 day remains in a downtrend. Expect the stock to make another attempt to push price above the 200-day moving average with some more good news.
How Larry Stacks Up To Steve; Not Too Well (Forbes)
In a comparison to how Steve Jobs ran Apple and Larry Page’s current management style, this article rips into Google. Job’s Apple may be the most beloved major company in the world because of the delightful fruits of its many world-best products and services, and its proven respect for people, property, and the rule of law. Page’s Google may be the most investigated and feared major company in the world, because of the bitter fruits of its market-leading rap sheet of criminal, antitrust, property, privacy, security, and other problems that showcase Google’s deep disrespect for people, property and the rule of law. Ouch.