I love Google as a stock (and slightly less as a company), even if I’ve been in out and too much, as I’ve documented here in the past. Today, however, we have an interesting question: Google stock is off 3% so far today, and has tumbled 17% since the beginning of the year, putting the high-flyer at $580.52.
So, is it a buy? Well, on a technical level this isn’t exactly a historical discount. The current price decline only takes us back to levels last seen on October 2nd of last year, after which it had a rocket ride $100 higher. In other words, it’s nice to see Google on sale, but we’re not exactly seeing an epochal buying opportunity, at least not yet.
Admittedly, however, the company remains dominant in search and online advertising, and neither of those synergistic markets are exactly going to disappear in the next few weeks or months or years. Further, the company isn’t all that expensive, at least not on forward earnings, trading at a forward P/E of 33, while likely to deliver considerably better earnings growth over the next few years.
Keep in mind, of course, that there is a lot of credible rumbling that online advertising — especially financially and consumer related — crunched into a wall in late December. Rumors of effective CPM price tumbles abound, and similarly unsalable inventory, and absentee advertisers no longer buying online space. That’s all not good.
So, where do we end up? I’m still a Google fan, but we’re also about a week from the company’s next earnings release. While I have no problem with people buying some GOOG on the current weakness — it’s a reasonable risk/reward — I also think that really sizing into the stock can wait seven days until we get a better sense of how online advertising is doing as we tip into recession.
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As always, factor in what you THINK other people MIGHT do, and in this case, with GOOG officially being 20% off it’s high, I think plenty of people have wanted to own it (or more of it) but were waiting for a drop (like me). Their properties are only getting stronger, their traffic %s are getting larger, and we haven’t had any huge acquisition announcements in quite a while, so I think the numbers will look good. AAPL is in a similar situation, strong company that’s getting stronger and that’s come down quite a bit from its high. The companies with spectacular balance sheets and increasing momentum, like GOOG and AAPL, are the ones most likely to weather the recession (there, I said it!) better than the rest, dropping less and recovering quicker.
I disagree with worth a bit. Sure, plenty of individual investors may have been waiting for a buy spot, but the big funds have been all over this name and probably over-own it at this point.
GOOG is still growing in traffic, but the real question is how are ad revenues? If we get even the hint of a slowdown out of their next quarter, GOOG will trade down to $400 in a heartbeat.
Personally, I think they’ll make the quarter by squeezing their adsense partners and not give any guidance on the future as usual. I have no idea how that will impact the stock, but I’d short on a quarterly earnings pop depending on what they say in the CC.
I have to say I disagree with some of the comments about google, although I would buy it on this weakness because I think others will move it higher.
buuut, googles properties (s) are NOT growing stronger, ONE property is, and the others are just as nascent as they have ever been. Their traffic to things like NEWS, FINANCE, maps, most are not in the top 10, some are yes in the top FIVE, but not really gaining in traction.