Google’s profits set for 34% jump

The tech giant remains a popular choice for traders despite a falling share price and the lacklustre success of pet projects like Google Glass.

Multiple Google logos behind a man on a phone
Source: Bloomberg

Google’s dominance in the online search engine arena remains sizable as May’s figures show 64.1% of US desktop users chose the browser to search the internet. To put that figure into context, the next most popular browsers were Microsoft with 20.3% and Yahoo with 12.7%.

Share performance for internet media stocks in the second quarter of the year was particularly poor across the board, with the only big name noticeable success being Facebook which was up 4.32%. Google’s fall of only 2.64% was almost impressive when compared to Yahoo’s 11.58% tumble, AOL’s 14.21% drop and Twitter’s 27.68% collapse.

Google is due to update the markets with its second-quarter figures on Thursday 16 July after the market has closed. For traders keen to react instantly to the release, it’s worth remembering this is one of many US equities for which IG offers extended trading hours

The market is expecting Google’s estimated earnings per share to come in at $6.713, while sales are called higher at $14.22 billion – up from last year’s $12.67 billion. This is contributing to expectations that the year-on-year Q2 pre-tax profit should jump by 34% from last year’s $4.403 billion up to an expected $5.923 billion.

These strong expectations are echoed by the strength of institutional opinion on the company with 12 buy recommendations, two holds and no sells. The average 12-month price target for the company is $644, which still offers an eye-watering $100 or 18.3% upside from the market’s current price of $544.86

Google’s determination to diversify away from its core business as an online search engine has seen it embark on further testing of driverless cars in Austin, Texas. Considering that almost all of the major car manufacturers are embarking on similar automotive programmes themselves, this is an audacious plan. It’s also a huge gear change up from the company’s current automotive endeavours, which primarily revolve around its existing car-pooling app.

It’s safe to say Google’s willingness to think outside the box for alternative revenue streams, away from its core business, has polarised opinion. Without anything becoming an outright success or an accounting disaster to date, the jury is still out on the diversification strategy, which partially explains why the tech giant’s shares have had such hitherto lateral moves over the course of the year.

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