Editor’s note: The following is a guest post by Nikolai Kuzentsov
Google Inc (GOOG) is a technology company invested in a range of diverse products and services. Google is primarily invested in Google Search, but it also delivers AdSense, AdWords and related services. YouTube is a big part of the Google brand, with free video sharing services, and ad formats. Hardware products such as Google Play, Chromecast, Nexus, Chrome OS and Chromebook are available too. Services like Google Wallet, Google Drive, Google Apps, and Google Plus are also available to users. Google Cloud Storage is also growing in popularity. Google Inc has its HQ in Mountain View, CA and was founded in 1998.
Stocks Surge on the Back of Strong Q2 Earnings Report
When Google (GOOG) reported its Q2 earnings on the 16th July, shares soared. In fact, the share price of $601.78 was shattered with a more than 10 percentage point gain to close at a record-breaking high. The share previously traded in a 52-week range of $486.23 on the low-end and $598.01 on the high-end. The stock is presently trading at $663.02 – a massive spike on the back of strong quarterly earnings. The company’s market capitalization at present prices is $452.45 billion, with a price/earnings ratio of 31.34, and earnings per share of 21.16. This is close to the highest share price for Google (GOOG) since the stock listed, and the bullish mood looks set to continue.
Google Inc is one of the most respected tech stocks on the NASDAQ, with scores of hedge funds and mutual funds including Google in their portfolios. When the Q2 report came out, quarterly earnings increased by 11 percentage points year-on-year. That translated into $6.99 per share (diluted). That analysts were expecting adjusted earnings of $6.75 also helped to boost interest in the stock. Google has attributed its strong earnings to strong YouTube growth, general product growth and increased programmatic advertising revenues. The company is carefully considering its resource allocation. It is also branching out beyond the Internet and into other areas such as Nest, a driverless vehicle, and a growing Android product range.
In fact, interest in Google stocks surged in after-market trading with the price reaching $683. For the after-hours trading session, the price was 13 percentage points higher on July 16th – up $73. During regular trading on session, the price of Google (GOOG) had already moved 3 percentage points higher. The moves on the tech-stock are notable given the relatively flat trading that accompanied stocks across the board as a result of Greek instability. Other factors contributing to the decline in general investor sentiment was the volatility in Chinese equities, with volumes significantly lower. Few stocks can lay claim to the success of Google in 2015. Since early January, the stock has surged 35%. At that point, Google (GOOG) was trading at $490.91 per share and is now at $663.02 per share.
Wide Range of Products under Development
Investor sentiment in Google is bolstered by the company’s involvement in multiple products and services. Across the spectrum, day traders, fund managers and everyday investors are flocking to Google en masse. Despite the surging interest in the stock, there is a great degree of reluctance on the part of small-scale investors. At well over $600 per share, Google (GOOG) is largely hands-off for most people. But traders are finding novel ways of profiting off the stock’s price fluctuations when they trade binary options. As news of Google’s Q2 earnings reports broke, traders anticipated the surge and purchased call options. With even the slightest price movement, traders can derive maximum yield at a guaranteed rate of return. Since the start of 2015, the price of Google stock has surged. This is especially true with the recent quarterly earnings report with share prices rising 10%.
Cost Cutting and Revenue Growth Strategy
Operating expenses at Google also increased at the slowest rate in 2 years. The new CFO of Google – Ruth Porat – is focused on cost-cutting measures to drive up profits at the company. Porat is reining in expenses which is something that resonates with investors. Google’s sales, less revenue to its partners increased to $14.4 billion (up 13%). That put a value of $6.99 per share, not $6.73 per share that was anticipated on sales of $14.3 billion. Expense management is being coupled with revenue growth as joint objectives which are not mutually exclusive. Q2 net income rose to $3.93 billion, up from $3.35 billion year-on-year.
Many analysts are cautioning traders to wait for a pullback in Google Inc (GOOG) stocks since the price is at record levels. Traders are being advised that a share price of $600 should be considered the floor on the stock. Even though Google’s revenues dipped slightly and ad metrics displayed mixed signals, traders were well pleased with the performance of Google’s YouTube platform. Yahoo! analysts have awarded Google (GOOG) a strong buy rating of 1.0 on a scale where 1.0 is a strong buy and 5.0 is a strong sell. The stock’s median target price is $675 and the high target is $680. Google is trading at a low target price of $580. Surprisingly, several research firms downgraded Google stock from a buy to a hold in 2015, but the next report is likely to support calls for purchasing the stock if earnings continue to climb.