If you need an introduction to search titan Google (Nasdaq: GOOG ) , I'd just tell you to go Google it. Big G reports third-quarter earnings Thursday night, so it's time for a quick check-up again. Will this report pull the stock out of its 47% tailspin year-to-date? Let's find out.
What Fools say:
Here's how Google's CAPS rating stacks up against some of its peers and competitors:
|
Company
|
Market Cap (billions)
|
Trailing P/E Ratio
|
CAPS Rating
|
|
Microsoft (Nasdaq: MSFT )
|
$218.2
|
13.7
|
***
|
|
International Business Machines (NYSE: IBM )
|
$126.8
|
11.4
|
***
|
|
Google
|
$114.1
|
23.6
|
***
|
|
Apple (Nasdaq: AAPL )
|
$92.2
|
21.6
|
***
|
|
Yahoo! (Nasdaq: YHOO )
|
$17.5
|
18.8
|
**
|
Data taken from Motley Fool CAPS on Oct. 14, 2008.
"Google is an advertising company, not a tech company," says bearish CAPS all-star StatsGeek. "Ad spending is first to get cut in a recession. I believe GOOG will have a big earnings miss in Q3 or Q4. Or both."
KipLargo disagrees and gives Google a big thumbs-up: "So long as we don't go into the dark ages, will probably buy up so many complimentary companies on the cheap, it will be twice as powerful five years from now with an even larger moat."
What management does:
A sliding net margin is balanced by fatter cash flows, which is an okay trade-off for most of us Fools. The slowing revenue growth is a simple matter of scale -- doubling your income is impressive when you start with $1.5 billion, like Big G did in 2003. Another double would be dang near a miracle, especially when you're a behemoth with $19.6 billion in trailing sales, like today's Google.
|
Margins
|
3/2007
|
6/2007
|
9/2007
|
12/2007
|
3/2008
|
6/2008
|
|
Gross
|
60.1%
|
60.1%
|
60.1%
|
59.9%
|
59.8%
|
59.8%
|
|
Operating
|
33.5%
|
32.3%
|
31.6%
|
30.7%
|
29.9%
|
30.0%
|
|
Net
|
29.0%
|
27.5%
|
26.9%
|
25.3%
|
24.9%
|
24.6%
|
|
FCF/Revenue
|
15.2%
|
17.4%
|
19.4%
|
20.3%
|
20.4%
|
20.9%
|
|
Growth (YOY)
|
3/2007
|
6/2007
|
9/2007
|
12/2007
|
3/2008
|
6/2008
|
|
Revenue
|
68.4%
|
63.6%
|
60.7%
|
56.5%
|
50.8%
|
46.0%
|
|
Earnings
|
106.5%
|
78.6%
|
66.5%
|
36.6%
|
29.3%
|
30.9%
|
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:
Google's results have been hit-and-miss for a long time, and I mean that literally. The last six earnings reports have outperformed and the underperformed analyst expectation in a steady one-two rhythm. By that completely unscientific logic, the company is due to outperform this time.
But that's a guessing game at best, and Google's management doesn't even pander to the Street with quarterly or annual guidance notes. The company has its sights set on the faraway horizon, and short-term bumps in the road are of little consequence to its bigger picture. This mindset can be maddening for get-rich-quick day traders, but long-term investors who buy on the massive dips should come up roses.
But I promised you a nearsighted update, and I cannot knowingly disappoint you, dear reader. Don't expect the Chrome browser to affect sales or earnings at all. The Android phone platform is a question for later quarters. It's business as usual in Mountain View for now, as even the effects of The Crash of 2008 will fall in the fourth fiscal quarter. Listen to the conference call to see what Larry, Sergei, and Eric think about that momentous event, and then invest accordingly. Personally, I'd put more money into Google -- if I could only stop writing about 'em. Dangit.
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