GOOG - Sector: Technology - Industry: Computer Services

[bananajo]

Once again Cal applaud !

I thought it would go down to 320. All because of Barrons article last weekend 
but opened a long position after watching trading at the open yesterday.

I hope GOOG will have another good day.

[cjm]

GOOG is taking a big hit after CFO spoke about growth slowing down.

http://biz.yahoo.com/ap/060228/google_stock.html?.v=2

[calven]

This is the 390 resistance area I talked about a few posts earlier. Good now 350 and will header lower!  Immediate short target of 310....

[bananajo]

got burned with my call options here. had a sell order in around 395 but within seconds...

[catrader]

got burned with my call options here. had a sell order in around 395 but within seconds...

what u mean, had sell order but never executed because it did not come back up to your selling limit? always looking to learn about options.  Soeey about your calls.

[bananajo]

thanks!
yes when goog pulled back to 395 after hitting 397 I thought that was it for today wont go higher. I decided to sell my calls (for a nice profit). the bid was 4.30 I set a limit at 4.30. then the bid went down to 4.28 I waited a little then deleted my order to change the limit to 4.28 but was to late. Incredible! shit really happens 

anyway sold now for a small loss will move to another stock. ABB looks good had a retrace today. maybe a chance to get in this week. will try to post the chart. 

[Terliso]

Google hits new high

[David Randolph]

1. Introduction

Today I made two analysis that were a bit boring, AVT and ARW, so I wanted to do something with a bit more sex appeal. So I chose Google 

What I find interesting about Google (beside giving a nice paycheck each month to www.3stocksonfire.org  ) is that, since it is such a high priced stock, many people rush to short it. But, of course, a high price doesn't mean anything about valuation, such as a low priced stock doesn't mean it's cheap. I bet that if GOOG did a 1/100 stock split, and the stock was trading at $4.72, many people that are shorting now would be buying it, even though the market cap would be exactly the same. It's a psychological trap.

I know that in the past I considered GOOG to be of little interest as an investment, since I was focused on small caps, and GOOG already had a $100 B plus market cap. But now mega caps are outperforming, so one needs to adapt. I thought I should give an in depth look at Google again.

If you would like to receive 3 analysis a day on your mailbox from 3 Stocks on Fire, please register.

2. Profile

Google, Inc. (GOOG) offers advertising and Internet search solutions, as well as intranet solutions through an enterprise search appliance. The company, through Google.com, provides Google WebSearch that offers access to Web pages; Google Image Search, a searchable index of images found across the Web; Google Groups that enable participation in Internet discussion groups; Google News that gathers information from news sources and presents news in a searchable format; Froogle, a shopping search engine; Google Local that allows users to find driving directions and local businesses; and Google Desktop that enables users to perform a text search on the contents of their own computer. Its Web and content search products include Google Scholar to search for scholarly literature; Google Book Search to bring print information online; Google Base to upload, store, and describe online or offline content; and Google Video to exchange video content between consumers and producers. These products also comprise personalized search and homepage, alerts, Web directory, and music search. The company's communication and collaboration products and services comprise Gmail, an email service; orkut that enables users to search and connect to other users; and Blogger, a Web-based publishing tool. Google also provides downloadable applications for computers; ability to search and view mobile Web, and a downloadable Java client application for mobiles; and Google Labs that operate as test beds for its engineers and users. Further, the company offers Google AdWords, an advertising program that presents ads to people; Google AdSense program that allows Web sites in the Google Network to serve targeted ads from AdWords advertisers; and search technology for enterprises through the Google Search Appliance and Google Mini. The company has a strategic alliance with Intuit, Inc. Google was founded by Larry Page and Sergey Brin in 1998. The company is headquartered in Mountain View, California.

3. Technical Analysis
3.1. All History Chart



I clearly remember when GOOG made it's IPO, which was priced at $80, every "guru" on this planet said the valuation was "insane". Yet, here we are, at $471  . I guess fundamentals improved a lot since the IPO. We'll check that soon on this analysis. Just note that ascending trendline on the chart, nice buying point.

3.2. Medium Term Chart



You can see GOOG is a "gapper". It reacts violently to news ... no, it just has a very high price, those gaps are not big percentage moves. It's a lot easier to gap when you're a $450 stock, when $10 is just 2.2%. Anyway, the medium term chart shows a lateral trend. GOOG stands at the top of the range now, but note that volume is a lot lower on this breakout attempt.

3.3. Short Term Chart



Will GOOG continue to move higher or will it come back down to close the gap and touch its long term ascending supports before resuming the uptrend? I don't know, I need to make some fundamentals tests to get more confident on the outlook. The chart alone isn't good enough.

4. Fundamental Analysis
4.1. Number of Shares Outstanding



Hey, who would say GOOG has been diluting shareholder value? What a shame !  The current market cap is $145 B.

4.2. Liquidity



GOOG has a strong balance sheet, as the current ratio is a very healthy 9.75.

4.3. Revenues



Revenues for 2006 will come in around $10.29 B. This is a 68% growth rate from 2005. The Price to Sales Ratio is 14.1, compared with 5.81 for YHOO, which is growing revenues 19% from last year levels.

4.4. Profits



According to estimates, GOOG will earn $9.52 in fiscal 2006, which ends in December 06. But I find estimates for the 4th quarter too high, at $2.88, considering GOOG made $2.36 in Q3 and $2.33 in Q2.

There's room for disappointment and a new gap, this time a down one. The Price Earnings Ratio is $472/$9.72 = 50, which seems to be very high. But the EPS growth rate is 90% YoY, so the earnings multiple may be justified or even cheap if the current growth rate continues.

5. General Overview

I actually think GOOG has a lot to grow over the years, and maybe even be the first company in the history of the world to reach the mythical mark of $1 trillion market cap. The risk to this scenario is the competition, possibly being attracted to GOOG's high margin business.

I also have some short term concerns: there has been some increase in the number of shares outstanding and Q4 earnings estimates of $2.88 per share seem hard to beat. The weak volume confirms this suspicion I have that GOOG won't hold current levels for long.

6. Trading Plan

My trading plan for GOOG is to wait for a correction to get in, maybe after the short fall of the 4Q numbers. I'll keep monitoring the stock and waiting for an entry point closer to the long term ascending trendline, which now stands at $399 (it rises $0.55 each trading day, so in 40 trading days it will be at $421).

I'm preparing to manage the 3 Stocks on Fire Portfolio, and in doing so I'm analyzing 3 stocks a day. If you would like to receive my analysis and stock market thoughts on your mailbox, please register.

[Ramsburg]

I have to applaud you Randy Boy 

I share your thoughts on GOOG by 100%, if there is a company out there capable of reaching the $1 trillion market cap somewhere in the future, that company is Google...

But from a trading perspective, we may find a better spot to get on this one.

Excellent analysis !

[Miguel007]

GOOG has broken out downtrend line on good volume during this week. In the daily charts Indicators are showing that stock is now in a Bull Market with MACD back again above 0 and stock is trading again above 50 dma and 200 dma.

[Lucas Scott]

GOOG reports after market close tomorrow 1/31/07. I'm very bullish on GOOG. I think they will stomp estimates.

According to estimates, GOOG will earn $9.52 in fiscal 2006, which ends in December 06. But I find estimates for the 4th quarter too high, at $2.88, considering GOOG made $2.36 in Q3 and $2.33 in Q2.

The Q2 and Q3 EPS figures David cites are the GAAP numbers, while the Q4 $2.88 estimate (has since risen a few cents) I believe is non-GAAP (before stock-based compensation). So its a bit apples to oranges.  Reuters shows Q2 EPS $2.49 and Q3 $2.62 (which were the non-GAAP numbers)and Q4 estimate of 2.91, and it stands to reason that number would also be non-GAAP. So that's just an 11% increase from Q3 to Q4.

Link to Reuters data...
http://tinyurl.com/2cfu6f

The chart shows a nice bullish wedge. I'd like to see a great earnings release followed by a gap up above the $511 double-top.

[tokyopua]

Just watched GOOG strategies on Fast Money, their "safe" play is to buy on the breakout of the $513 double top, or buy on a drop to support at $450.  The lotery ticket is the Feb $450 puts lol.  The options action expects volatility of 8% either way.  I think that as long as the market is tame tomorrow, a buy in the morning will be a good trade by EOD as more people probably expect GOOG to outperform.

I am a bit undecided myself as to whether I will play it, but dont care so much since I have been making bank with David's 3 Stocks on Fire picks anyway, I am more excited to see what tomorrow brings with that porfolio lol 

[David Randolph]

Google is an amazing company and I love it, but the company basically relies in one source for its revenue and profits: online advertising.

As you've probably noticed, our website has "some" google ads, and we receive money when you click them. Even though the site has been having more traffic lately (especially in February) and the number of clicks is rising, we're getting less and less money for each click.

This tells me one of two things:

1) There's less people joining the Google ad words program, or they're paying less for each click, on average. That means we get less, and obviously Google gets less money;

2) Google is squeezing content providers like us, and is getting a bigger and bigger share of the pie (they don't disclose what their share is).

I believe the first hypothesis is the correct one. As I said previously, advertising is the first thing to go down when the economy softens, especially advertising done by small companies like the ones that join Google ad words.

GOOG is trading at 13 times revenues and 45 times earnings. Investors won't forgive any earnings or revenue miss.

Technically GOOG made a perfect double top pattern, with confirmation after Tuesday's gap down. The stock is set for a good (good no, bad ) $100 move to the downside.

Trading plan:

Sell GOOG stock short, 6.66% of capital as always.

[David Randolph]

Jesus, I had to almost double my usual exposure to one stock to sell 100 shares short of GOOG.

[tokyopua]

Jesus, I had to almost double my usual exposure to one stock to sell 100 shares short of GOOG.

Can you explain what this means David, I dont understand?  You wanted to sell 50 short but it had to be 100 for some reason?