THE GOOGLE INVESTOR: Stock Tanks With Market

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gmdestroyed tbiWhere’s the bottom?

GOOG Plummeting
Shares of GOOG are getting clobbered with the rest of the market today, off 3% to $513. While the search business will likely drive solid growth for the balance of the year as the online ad market recovers, investors are concerned with increasing costs and lack of secondary growth engines. Potential catalysts include Android and mobile adoption as well as benchmarks surrounding newer initiatives (which up until now have been disappointing). The stock trades at approximately 19x 2010 EPS and 16x Enterprise Value / EBIT.

Google Stock Still Has A Shot At Reaching $2,000 By 2018, But It Needs Another Growth Engine (Business Insider)
Henry Blodget at Business Insider lays out what Google needs to do to kickstart the stock and reach $2,000 per share. Bottom line, Google needs another big growth engine to accompany the search business. What’s it going to be? He doesn’t know, and neither does Google. What the company does have is cash. So the moment Google sees a potentially lucrative and complementary opportunity, it can buy a small company and then turbocharge it with its vast global user base and cash flow. The company is trying to do just that; making small acquisitions at a steady clip for the past few months.Google Continues Its Acquisition Spree (The New York Times)
Google has been liberal with its cash pile lately, making 10 investments this year alone. The company is looking to invest about $100 million per year.  Google Ventures’ investment team includes Karim Faris (Atlas Venture) and a host of early Googlers. The most recent investments/acquisitions have been:

  • Wind power farms in North Dakota ($38.8 million)
  • BumpTop software that creates a 3D interface for the desktop (terms were not disclosed)

Views From The Street: AdMob Scrutiny Alarming And Google Driving More Commercial Traffic
From Wall Street this week:

  • Spencer Wang at Credit Suisse is worried about the FTC’s scrutiny of the Google / AdMob deal as it highlights concerns regarding Google’s mobile positioning and increased regulatory scrutiny overall. He believes there is a high probability that the FTC files for a request for preliminary injunction against the deal, however Google’s odds of success here could be better than investors think.
  • FBR Capital Markets analyst Heath Terry attended the recent ChannelAdvisor conference. Terry found that recent innovations by Google in e-commerce are pressuring traditional comparison shopping engines and driving more commercial traffic to Google. Google has also begun recommending brand refinements of general product searches, generating more search volume, and requiring advertisers to also include brands in their search ad strategy.

April Browser Share Numbers Show Chrome Gaining Share At Expense of Microsoft IE (Net Applications)
April browser share numbers from Net Applications illustrate a continuing trend: Google’s Chrome and Firefox are gaining massive share; Apple’s Safari is gaining slight share; Microsoft’s Internet Explorer is falling out of bed. Henry Blodget believes the more important story here is that Google’s Chrome is gaining share much faster than Apple’s Safari. This highlights the power of Google’s “open” software model, as compared to Apple’s integrated hardware-software combo.

Google Going After TV Where Apple Has Notoriously Failed (The Wall Street Journal)
Google could show off its new Android-based TV software at its Google I/O developers conference in May. The project could give Google an entry into TV advertising via web videos. Dan Frommer at Business Insider believes that the biggest hurdle is pricing. These TVs will probably be significantly more expensive to make, which could limit adoption. YouTube is also experimenting with a real-time sports feed which “could shake up the sports broadcasting world.”

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