It would be easy to think after Wednesday's stock price pop of over $47 per share that it's too late to grab Google (GOOG -1.96%) (GOOGL -1.97%) on sale. Thankfully, the sell-off was so overblown -- as so many of them tend to be -- that Google remains a bargain.
The "concerns" surrounding Google generally focus on its declining cost-per-click rates due to arriving a bit late to the mobile search party, along with its far-flung forays into futuristic endeavors like driverless cars and nanotechnology.
But as new-ish CFO Ruth Porat made clear when announcing second-quarter earnings in July, Google is making significant strides where it counts, and the recent market fluctuations that saw Google shed over $80 a share in a matter of days has made a solid, long-term growth opportunity that much more attractive.
What really matters
Prior to Google announcing second-quarter earnings on July 16, it was trading at about $601 a share, give or take. The day following its quarterly results, the stock price jumped to just shy of $700 a share. Clearly, Google once again knocked its financials out of the ballpark, particularly where it counted.
Google generated a whopping $17.73 billion in revenue last quarter. For a company of its size, reporting double-digit sales growth year over year is nothing short of impressive, and warranted investors' good tidings. What made Google's second quarter even more telling was how it came about its top-line growth and $6.99 in non-GAAP (excluding one-time items) earnings per share.
During her second-quarter earnings call, Porat made a point -- actually, made it several times -- to mention the positive impact mobile is having on Google's sales. Like its primary digital advertising competitor Facebook (META -10.56%), Google is reaping the benefits of marketers shifting more ad dollars online. That's particularly true of mobile digital spots.
Mobile usage on Google sites was up over 50% compared to the second quarter of 2014, and now averages about 40 minutes each day -- and that increased usage is translating to revenue. Thanks in part to continuing to expand its video advertising alternatives, the top 100 marketing partners have increased their respective ad spend on Google "over 60%" compared to last year.
Facebook has a long way to go in catching Google as it relates to sales, having just broken the $4 billion quarterly revenue milestone for the first time last quarter, but that hasn't stopped it from leading the mobile digital advertising charge. Last quarter, 76% of Facebook's ad revenue came from mobile. Naturally, Google wouldn't share specifics, but Porat was adamant that mobile is no longer an afterthought and that emphasis is beginning to pay dividends.
Then there's YouTube
Part of the reason Facebook was able to generate slightly over $4 billion in revenue last quarter was its decision to roll out video ads across its site. As it happens, Google's YouTube is quickly becoming a shining example of just how lucrative video can be. According to Porat, Google is enjoying "significant growth in YouTube revenues," thanks in part to its more than 60% increase in viewing time.
In fact, in the U.S. mobile YouTube usage accounts for more views among 18- to 49-year-olds than any cable network. Beyond its solid mobile and YouTube performance, Google's "other revenues " continues to climb. At $1.7 billion last quarter, Google's cloud solutions is growing, as are sales from its gaming downloads, which added more than 180 million new gamers around the world in the last six months alone.
Last but not least
Let's not forget Fiber, which Porat pointed out is a "long-term growth opportunity," and even Google's wireless service. Of course, there are still those far-flung moonshot development efforts that have weighed on Google's share price for some time, but even those have been addressed.
The creation of its Alphabet holding company may have caught a few Google followers by surprise. The move did seem to come out of nowhere, but there was a method to CEO Larry Page's madness. Those far-flung efforts like Project Loon and driverless cars -- let alone whatever else Google's thinking up in its secretive X Lab -- are now under a separate umbrella from its bread-and-butter search and ad units.
At about 21 times forward earnings according to S&P Capital IQ, double-digit revenue growth despite its size, and a new, more clearly defined business model in place, Google was a sound investment before the recent sell-off. Now? It's an absolute steal.
