What It Takes to Catapult Google Even Higher In 2014

Shares of Google (NASDAQ: GOOGL  ) rose 58% higher in 2013, nearly doubling the returns of the S&P 500. Along the way, Google's stock broke through the $1,000 share price benchmark (and $1,100 for good measure) and built the third largest market cap on the stock market.

What will it take to catapult Google even higher in 2014?

Google shares aren't exactly on fire sale right now. In fact, Google is closing out 2013 at the highest P/E ratio seen since 2010. So don't count on multiples expansion driving the stock higher in 2014. Instead, the online giant must prove its worth with strong earnings.

GOOG Revenue (TTM) Chart

GOOG Revenue (TTM) data by YCharts.

As this chart shows, Google still knows how to grow both the top and bottom lines like a hungry little upstart. Year-over-year revenue growth has clocked in at 24% or more in each of the last three years and is on pace for another 24% showing in 2013. Analysts predict a 16% revenue uptick in 2014, which would be the second slowest annual sales growth in Google's history.

Earnings are seen going 18% higher in 2014. Google's bottom-line growth is not nearly as linear as the revenue line's, and the company is only on pace for a 9% earnings-per-share increase in 2013. So Wall Street expects Google to slow down in terms of sales growth but accelerate its net income increases.

Behind the numbers, Google has plenty of balls in the air.

The Android platform is a worthy challenger to Apple (NASDAQ: AAPL  ) in America and trounces Cupertino's mobile platform globally, but Samsung pockets more of that income than Google does. The Motorola Mobility buyout does give Google a small interest in direct Android hardware sales, but Motorola-branded smartphones hold just 5% of the worldwide Android market next to Samsung's dominating 63% share. If Google wants to make money on Motorola handsets and tablets, there's plenty of work to be done here.

Google's peerless online advertising platform is already plenty effective, but Big G still tweaks its search-plus-advertising formula all the time. The latest round of nips and tucks should drive Google's revenue and gross margin higher in 2014, as advertisers can build ever more pinpointed marketing campaigns. Better campaigns should yield higher ad prices in Google's auction-style pricing model.

I'm not sure if Wall Street analysts have taken the latest ad tweaks into account, so it wouldn't surprise me to see Google shocking the Street in 2014's earnings reports. The first one is due in about three weeks, so there's your first chance to see Google's tighter ad model at work.

If Google beats revenue targets with gross margins north of 58% this time, you'll know that the advertising tweaks are working -- and that Google will beat analyst estimates for the next year as well.

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