) will report earnings on Thursday after the bell with a
scheduled for 4:30 pm EST.
It's all about online ad revenue just as it was with Yahoo
). Of particular importance will be ad revenue generated from
mobile sites as an increasing number of users ditch their
computers and use tablets and smartphones.
Google is expected to report EPS of $10.69-a 10 percent
premium year over year. Analysts expect revenue of $14.22
billion-a nearly 75 percent increase year over year. Analysts
expect ad sales to grow by 20 percent year over year.
The Bull Case
Google has seen a resurgence of late. Google Glass, a wearable
computing product that has the attention of investors and tech
junkies alike, represents a step forward in the hardware market
and a commitment to not just produce software based products, but
also innovative hardware.
The company is also planning to open retail stores later in
2013. If it works as well as it did with Apple (NASDAQ:
), it would represent a powerful revenue stream. (Is Ron Johnson
still looking for a job?)
Then there's the 31 percent stock appreciation in the past 12
months. This is great news for a stock that has provided little
return for long term investors over the past couple of years,
along with no dividend.
The Bear Case
First, valuation. Do you want Google, with a forward P/E of
nearly 15 when you could have Apple with a forward P/E of eight?
Of course, both sides will have passionate arguments for this
question but an increasing number of investors are seeing Google
as overvalued at these levels. That might be why the stock is
trending lower and some are calling Google the next Apple when it
comes to stock corrections.
Then there's display ad revenue. The mobile device market is
growing at an unbelievable rate but the price of ads on mobile
devices doesn't command as high of a price as traditional ads.
This is why Google's cost per click metric has fallen year over
year in the past five quarters. The good news is that the decline
Also watch for color on the Motorola Mobility acquisition that
has resulted in $1.1 billion in losses since its acquisition.
The stock has been in an uptrend since mid-November hitting a
52 week high of $844 at the beginning of March. Is has since shed
about seven percent of its value. It's holding the lower trend
line of the ascending channel but its 50 DMA has served as strong
resistance over the past couple of weeks. While a break above the
50 day would be a positive sign, until the stock breaks through
the $817 level on volume, the downtrend is still in place.
Regardless, the risk/reward for an earnings day trade is
attractive at these levels. An impressive earnings announcement
could send the stock significantly higher. But a hedged play is
still advised since a negative report would give the shorts even
more reason to pile in.
Disclosure: At the time of the writing, Tim Parker was long
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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