Lots of chatter this weekend about where a bottom might be for Google. After all, the stock has weakened largely in anticipation of poor upcoming results, not because it has drastically underformed expectations yet.
Let’s say, however, the search company is set to perform less well, at least for a couple of quarters. That seems a reasonable assumption, as I’ve written here a number of times recently. After being a Google bull for a long time here — and I’m still a long-term fan — I pulled in my horns late last year, partly because of how belated financial services companies were being in slowing spending, and partly because of the company’s miss (and poor explanation) on its last quarterly numbers.
So, where could Google stock go from here? Well, it all depends, of course, on how bad things get. If the company makes or beats its first quarter numbers, which are likely to be announced around the end of April, then the stock will recover straight away, burning the shorts. If it misses mildly, then the stock’s performance will depend on the guidance. Good, and it maybe losses a few percentage points; bad and it goes down 10% or more.
If we miss materially — say by 5% or more — then we could, however, easily a major Google air pocket. How much of a fall in the latter case? If the stock were to fall to low-20s-times trailing earnings, basically giving Google credit for industry growth and then treating the earnings outlook as a crap shoot, we could see GOOG back to $350 or so. Not a pleasant worst case scenario, but such scenarios never are.