Is Google Really Out of the Woods?

Search for "recession" at Google (NASDAQ:GOOG) and you get few hits, at least when it comes to the search giant's third-quarter results. Personally, though, I doubt it's out of the woods yet -- it won't be until the economy improves and that will take some time.

Google's net income increased 26.2% to $1.35 billion, or $4.24 per share. Revenue increased 31% to $5.54 billion.

It's pretty impressive, considering all the frightening signs. Even a venerable -- and you'd think fairly recession-proof -- company like PepsiCo (NYSE:PEP) announced a lackluster quarter and a plan to lay off workers earlier this week. And eBay's (NASDAQ:EBAY) bum quarter made my fellow Fool Rick Munarriz believe eBay should be renamed at this point.

Exactly one year ago, I scoffed at some analysts' projections about Google at the time; they were calling for an $800 price for Google stock. I said: "And if a recession does come -- and I'm thinking that's not an 'if' proposition, given all the signals -- advertising will slow down. I'm not sure why people think things are different this time."

Well I was right about the recession, the stock not hitting the $800 target, and advertising -- traditional media companies like CBS (NYSE:CBS) and Viacom (NYSE:VIA) have warned about the increasingly tough ad environment, and newspapers are feeling the pinch big-time, too. And remember -- last quarter Google didn't meet analysts' more bullish projections, providing a wake-up call that the company isn't completely immune to economic headwinds.

Still, I can see why investors are feeling lucky today, since there have been ample reasons to believe Google could have reported a disappointing quarter under the macroeconomic circumstances.

Google's stock is certainly not looking tremendously overpriced, trading at just 17 times forward earnings and down 45% in the last year. Furthermore, like fellow tech stock Apple (NASDAQ:AAPL), Google has a great brand, no debt, and a ton of cash on the balance sheet; Google's cash stands at $12.7 billion, and it generated $1.73 billion in free cash flow in the quarter.

Yet Google still just isn't at the top of my stock wish list. Today's upbeat tidings still don't convince me that a downer economy won't hurt Google further down the road as ad budgets continue to deteriorate. While Google certainly isn't a downright dangerous buy at these levels -- unlike highly indebted or serially unprofitable companies, for example -- I still suspect interested investors may find cheaper opportunities later on.

Search out some related Foolishness:

• Fool Anders Bylund provided a Foolish Forecast.
• Google's fresh out of Androids.
• Google's 10 years old -- it may be entering its awkward phase.