Is Google heading for a fall?

Google’s earnings are out on 16 April and, given the tech selloff over the past few weeks, can the figures put some upward momentum back into the stock?

The recent stock split and the decision to sell off the Motorola unit has been the big news of late, but Google will need something significant to boost enthusiasm when its earnings arrive.

In the last quarter, revenue was up 22%, hitting $15.7 billion. Meanwhile, margins are holding steady at 21.6%. The operational picture looks bright for the company, and the plentiful free cashflow of $11.3 billion gives it the wherewithal to continue investing in its YouTube, Android and Chrome operations.

Comparing the competition

When looking at Google’s share of the search engine market, the picture is almost embarrassing: it has 67.5% of the market, compared to 18.4% for Microsoft. Google’s dominance looks almost insurmountable.

Google’s share price has marched higher since the middle of 2012. The shares dropped by around 12% during March, but in the recent selloff they were left comparatively unscathed. The company’s PE of 30 seems relatively sane compared with some of the sky-high valuations in the sector, illustrating that quality will usually shine forth in these situations.

Prospects for Google's share

The share price has found a floor at $540 for the time being, although the 100-day moving average around $567 appears to be throwing up a degree of resistance. In the short term, it may well be that Google will be dragged lower along with the rest of the market, but in the longer term it seems unlikely that we can hold back the share price. Expectations are for adjusted earnings of $6.367 per share, or GAAP (Generally Accepted Accounting Principles) earnings of $5.283.

Google has beat forecasts in four of the last eight reports, so the general expectation will be for another beat here. It’s time for the internet behemoth to step into the spotlight.

Google is available for extended hours trading. Here is a  list of US stocks that can also be traded outside New York Stock Exchange trading hours of 2.30pm to 9pm (London time).

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.