Why Google Stock Hit a 52-Week High Last Week

Each week, I endeavor to report the results of the Big Idea Portfolio, a collection of five tech stocks that I believe will crush the market over a three-year period. I've done it before; my last tussle with Mr. Market ended with me beating the index's average return by 13.35%.

Real money was on the line then as it is now, which means any one of the five stocks you see below could tip the scales in my favor. This time, Google (NASDAQ: GOOGL  ) stock hit a 52-week high and Riverbed Technology (NASDAQ: RVBD  ) reversed a sell-off.

But it was a nearly 7% gain in Google stock that led my portfolio higher. Investors can thank Google Now for iOS, which the company released on April 29. Similar to Siri for how it allows users to speak queries into the search engine, Google Now, an intelligent personal assistant, has been a must-have for Android smartphone and tablet owners since last summer.

Source: Google.

So far, the updated Google app with Now gets just three out of a possible five stars in the iTunes App Store. Why the low rating? Concerns over battery life. A growing number of users say Now drains devices by tapping iPhone and iPad GPS tracking data too frequently.

Google says those fears are unjustified. Who's right? Logically, it makes sense that continuous tracking by any app would drain battery life. But I've also seen minimal impact on my iPad Mini's battery after having Now up and running for about a week. I'm still early in the process of testing the upgraded app on my iPhone 4S.

Either way, the rush to implement Now proves Google is making headway on Apple's home turf. All told, Google has 27 apps available at the iTunes App Store. Apple has only 11 more, many of which are far less popular than Google Search and YouTube, mainstays that rank among CNET's top choices for iOS apps.

Riverbed hasn't made as much progress in its niche. First-quarter revenue and profit came in lower than expected as management reduced Q2 guidance to $0.21 to $0.22 a share in adjusted profit on $255 million to $260 million in revenue. Analysts had been calling for $0.25 and $273 million, respectively.

In earlier quarters, a miss of this magnitude would have initiated a sharp sell-off. And that, indeed, is what we had initially: The stock declined to just over $14 a share before rallying. Why the jump? My guess is, with Riverbed trading for less than 13 times next year's earnings target, there's little downside left to buying at current prices.

What's the Big Idea this week?
For the week, the Google stock rally overshadowed Riverbed's run. Apple, Rackspace Hosting, and salesforce.com also notched significant gains as my five tech stocks gained ground on Mr. Market for the second consecutive week. The Big Idea Portfolio reclaimed 336 basis points in our three-year contest to see who can do better for investors. All four indexes also gained.

This time, the Nasdaq led the indices with a 3.03% jump, followed by the Russell 2000's 2.05% gain, the S&P 500's 2.03% bump, and the Dow's 1.78% improvement, according to data supplied by The Wall Street Journal. Here's a closer look at where I stood through Friday's close:

Company
Starting Price*
Recent Price
Total Return

Apple

$416.26**

$449.98

8.1%

Google

$650.09

$845.72

30.1%

Rackspace Hosting

$41.65

$49.49

18.8%

Riverbed Technology

$25.95

$15.53

(40.2%)

Salesforce

$25.26**

$42.24

67.2%

AVERAGE RETURN

--

--

16.80%

S&P 500 SPDR

$124.39**

$161.37

29.73%

DIFFERENCE

--

--

(12.93%)

Source: Yahoo! Finance.
* Tracking began at market close on Jan. 6, 2012.
** Adjusted for dividends, splits, and other returns of capital.

Notable newsmakers
Among the other tech stocks making news last week:

  • Facebook (NASDAQ: FB  ) rose more than 5% last week despite reporting slightly worse-than-expected earnings results. Mobile ad revenue surged 30% while Instagram reached 100 million active users. Overall revenue soared 38% as the social network's installed base grew to 1.11 billion worldwide, a 23% improvement.

  • LinkedIn (NYSE: LNKD  ) fell as much as 14% after reporting disappointing guidance. The professional network expects $342 million to $347 million in revenue in the current quarter, well below the $359.2 million Wall Street was hoping for.

  • Nuance Communications (NASDAQ: NUAN  ) also took a beating, falling 19% after reporting fiscal third-quarter results well below consensus estimates. Revenue fell more than $30 million short while profit came in $0.06 below projections.

  • Finally, mark your calendars: Rackspace Hosting reports results on Wednesday, May 8.

What else caught your eye in the tech world last week? Do you believe Google stock will rally from here? Let us know what you think in the comments box below.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.


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