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Tech Check
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AP |
] in the books surprisingly early, we can now turn our attention to Google [GOOG
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] , reporting after the bell later today. And while there's no question Google's business is slowing, the Microsoft news proves that Google is really the only online advertising game in town. The Street's looking for $4.96 in earnings in per share on $4.12 billion in revenue. Most analysts I'm talking to expect an inline quarter, and just like in quarters past, they'll be forced to read the tea leaves when it comes to guidance since Google doesn't peddle in such trivials.
But that won't stop the Street from pouring over several key metrics that will help tell the health and welfare of this company. The non-GAAP operating margin should come in somewhere around 49.1 percent. Anything above, say, 50 percent would be looked at very positively. Mark Mahaney at Citigroup continues as a Google bull with a $450 target and reiterated his "buy" on these shares just a couple of days ago.
His helpful cheat sheet offers a nice range road map for investors studying the company's P&L when it's released tonight. He anticipates a 17 percent increase in paid click growth, but 13 percent to 17 percent would be acceptable, and anything below 13 percent could pose problems. Google's Web Site gross revenue should be right near $3.7 billion; network sites' gross revenue should exceed $1.7 billion and something less than $1.68 billion would be viewed negatively; North American revenue should be up 10 percent, and something less than 5 percent would pose problems; Mahaney says Google's capex spending should be $627 million, though anything less than $450 million would be a good sign. Also, keep track of the hiring line. Google's been trying to rein in expenses, recently laying off 100 recruiters, so the addition of 500 employees in the fourth quarter is expected. Fewer, Mahaney says, would be good. More, not so much.
All of that aside, with the precipitous drop in Google shares, the question will invariably arise as to whether its brightest days are behind it and whether investors can still consider the company a "growth stock."
The answer has to be "yes," and an easy "yes" at that.
Look, Google's profit growth has slowed significantly, partly because of the market conditions it faces and partly because of the law of large numbers. But let's not forget, for all intents and purposes, Google is still the only game in town when it comes to Search and online advertising. In its report this morning, Microsoft disclosed that its online services unit did $866 million in revenue, flat to the prior quarter, and well below the $930 million or more that some on the Street expected. Even if the company did hit its online number, it's a pittance compared to what Google, and even Yahoo [YHOO
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] does. And if its only saving grace is some kind of deal with struggling Yahoo and also-ran AOL [TWX
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] , Google's better off than you might think.
Even if Microsoft and Yahoo and AOL stop their fumbling and come up with a deal, the ideas being bandied about are so complicated that meaningful integration could still be a year away, and that's if they announce a deal today. Over that time, Google will continue to tighten its already vein-busting stranglehold on online advertising. Google continues to gain market share. And at some point, this economy will turn, and advertisers will come back, and they'll realize the unique value-proposition Google offers. This year indeed might be a wash. But longer term, Google seems like a great play. And that doesn't even take into account whether this company actually comes up with another revenue stream, which has been elusive so far.
Even without it, though, Google's looking good for those squinting investors trying to get a glimpse at what's looming just over the horizon.
Questions? Comments?
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