Google's Results Are No Disappointment

All told, Google's quarter looks pretty good.

Apr 16, 2014 at 7:00PM

U.S. stocks rose for a third straight day on Wednesday, putting them back within 1.5% of their early April all-time high. The benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) both gained 1%. The technology-heavy Nasdaq Composite Index (NASDAQINDEX:^IXIC) rose 1.2%; that performance was helped by Google (NASDAQ:GOOG) (NASDAQ:GOOGL), as the A shares and C shares were up 2.8% and 3.8%, respectively, in advance of the company's first-quarter results (both share classes are currently included in the index -- the A shares will be removed before the market open on June 23). However, if the price action in after-hours trading is any indication, Google shares will be an anchor on the index tomorrow, after the company's results disappointed. The same effect looks likely from another tech heavyweight, IBM, which also reported disappointing results after the close.


All right, yes, Google missed Wall Street's expectations on both revenue and earnings per share, but let's put those misses in perspective by arranging them next to year-on-year growth:


Miss Relative to Analysts' Consensus Estimate (%)

Year-on-Year Growth (%)




Earnings per share (adjusted)



Source: Company documents, S&P Capital IQ.

Year-on-year revenue growth of 19% is pretty impressive for a company that just rang up $15.4 billion in quarterly revenues! Crucially, however, the two key variables that drive Google's revenues, the number of "paid clicks" and the "cost per click" (the average amount advertisers pay Google per click), had opposite effects on overall growth. Indeed, the number of paid clicks rose sharply (26%), while the cost per click declined by 9%.

It appears that, as users transition from laptops to mobile devices, they are still clicking on ads, but their clicks are becoming less valuable, i.e., from the advertiser's point of view, it takes more clicks to close a sale. It's not difficult to imagine, for example, that consumers may be more reluctant to purchase bigger-ticket items on a mobile device (particularly a phone) compared with a laptop or desktop, as the smaller screen doesn't lend itself as well to research and due diligence.

Nevertheless, Google Chief Business Officer Nikesh Arora struck a confident tone on that front on the earnings conference call, arguing that mobile has the benefit that advertisers know more about the user. As users -- and companies -- become more focused on mobile platforms, it's becoming easier to close sales there. The upshot? Google is confident that mobile will improve.

While we're on the topic of understanding Google's business, because ad revenues are the business, the company will, beginning with the next set of quarterly results, break out paid clicks and cost per click by network and site, in addition to the aggregate figures. For investors, more data is no bad thing (up to a point, after which you need a search engine).

All told, this doesn't at all look like a bad quarter, and the after-hours reaction (down roughly 3% as of 6:30 p.m. ET) looks like somewhat of an overreaction. At 20.7 times the next 12 months' earnings-per-share estimate, Google's shares look like they offer adequate value -- they certainly deserve a premium to the broad market.

The next Google: 3 stocks poised to be multibaggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multibagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

Alex Dumortier, CFA, has no position in any stocks mentioned. The Motley Fool recommends Google (A and C shares) and owns shares of Google (A and C shares) and IBM. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers