Foolish Forecast: Nobody Gets in Google's Way

"You gotta roll with it
You gotta take your time
You gotta say what you say
Don't let anybody get in your way"

-- "Roll With It," by Oasis, from the 1995 album (What's The Story) Morning Glory

Google (Nasdaq: GOOG) reports third-quarter earnings Thursday night. Last time, the numbers were disappointing and the stock took a fall. On the other hand, the competition feels threatened enough that they're trying to team up for this battle. So what's the story (morning glory)?

What Fools say:
Here's how Big G's CAPS rating stacks up against some of its peers and competitors:

	Market Cap (Billions)	Trailing P/E Ratio	CAPS Rating (out of 5)
Microsoft (Nasdaq: MSFT)	$269.4	16.5	***
Google	$142.1	34.1	***
Time Warner (NYSE: TWX)	$51.2	12.3	***
Yahoo! (Nasdaq: YHOO)	$37.8	60.02	**
IAC (Nasdaq: IACI)	$5.6	N/A	***

Data taken from Motley Fool CAPS and Yahoo! Finance on April 16.

Our CAPS players like Google more as a long-term investment than as a short-term trade. The company has a commanding lead in the online search and advertising markets that are nearest and dearest to its heart, and the stock has been punished quite severely this year.

Of course, some still think that Google's stock is overpriced, and others worry that high-profile Google managers who are leaving to start new ventures will bring serious competition someday soon.

What management does:
The online business has always brought rich margins. But although margins have been somewhat stable across the board, keep your eye on Google's growing free cash flow.

Margins	9/06	12/06	3/07	6/07	9/07	12/07
Gross	60.1%	60.2%	60.1%	60.1%	60.1%	59.9%
Operating	33.8%	33.8%	33.6%	32.4%	31.7%	30.7%
Net	26%	29%	29%	27.5%	26.9%	25.3%
FCF/Revenue	16.6%	15.8%	15.2%	17.4%	19.4%	20.3%

Growth (YOY)	9/06	12/06	3/07	6/07	9/07	12/07
Revenue	77.5%	72.8%	68.4%	63.6%	60.7%	56.5%
Earnings	86.5%	110%	106.5%	78.6%	66.5%	36.6%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
My reasons for owning Google stock are simple: The company is untouchable in its areas of core competence, and it's working on applying the lessons learned online to other business opportunities. Google is about to start auctioning off TV commercial spots much the same way it handles AdWords and online advertising. And early trial feedback suggests that the new model is simpler and more effective than traditional TV ad-buying procedures. Grabbing even a small slice of the $66 billion market of North American TV advertising will boost Google's already considerable cash-generating powers.

Any bumps in the road toward that vision are mere buying opportunities to me. As such, I'm sort of hoping for bad news tomorrow night, because my portfolio could use a few more Googly shares.

But given Google's positioning in the market and innovative attitude, I wouldn't be surprised if the quarter is nothing but gold.