) is expected to announce Q2 2011 earnings on July 14th. The
company continues to dominate the search advertising market
where it competes with Microsoft (
), Yahoo (
) and AOL (
). However, in recent quarters Yahoo has registered significant
market share gains compared to Google, which has shown a relatively
flat outlook over the past 3 months. During the upcoming earnings
release, we will keep a close eye on Google's search ad revenue
growth, as well as the company's operating expenses, which surged
in Q1 2011 from the same quarter last year.
price estimate for Google stock stands at $576
, which is at a 5% premium over the current market price.
Margins threatened by Growing Operating Expenses
Google reported a steep rise in operating expenses driven by
sales & marketing and general expenses in Q1 2011, which rose
by 69% and 44% year over year. During this same period revenues
grew by roughly 27%. The escalating expenses are attributable to
increased promotion of the Chrome browser as well as a 10% salary
increase across-the-board in the company.
We expect some of these bottom-line trends to continue in Q2
2011 as Google respond to increasing competition from Yahoo and
Microsoft in both search and browser markets. Additionally, given
that Internet usage slows down historically in summer months, we
could see a downside to profit margins for the coming quarter.
Google's Domination Continues, but Competitors Catching
Google continues to be the dominant player in the global search
engine with market share of about 68% in 2010. However, the last
quarter has seen a relatively flat outlook in Google's search
engine market share as compared to competitors both in the U.S. and
non-U.S. markets. Google's total search share has in the U.S. in
fact declined from 64.2% in Apr 2011 to 63.3% in May 2011 while
Yahoo registered a 1.7% gain in market share for the same period.
Another significant long-term threat is the recent web-search
partnership between Microsoft and Baidu in China, which should give
Baidu access to Bing's technology. This can signal a further
decline to Google's audiences in the world's largest Internet
See our complete analysis for Google