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Contributors: Douglas McIntyre Jon C. Ogg

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Thursday, July 20, 2006

Bogeying Google Earnings

Google (GOOG) Preview: analysts average expectation is about $2.23 per share, but this differs widely and some are close to $2.40 per share. Revenue expectations are about $1.65 Billion, and that range is fairly tight with most being under $1.71 Billion. Keep in mind that these numbers may have changed as recently as last night or this morning as analysts often tweak the numbers at the last minute. As a reminder, Google never gives guidance.

Options seem to be pricing in a move of up to $15.00 based on noon pricing, but this seems lower than the past because of such a short time (1 day) until stock options expire. The Google chart has been more non-directional than anything, but after looking a little deeper it appears as though Google has been basing out each time it gets around its 200 day moving average. While the market had an oversold reading before yesterday, this stock hasn't shown anything close an oversold reading since May and may have even been in overbought territory up until the most recent slight pullback. The analysts are still positive on the stock, and it is quite easy to find targets at $500 and above.

A contrarian would worry because so many analysts and market pundits are postive on it, but a technician would say the stock has pretty firm support at the 200 day moving average. Flip a coin, because one will be right or one will be wrong.

Watch the percentage of ex-TAC (traffic acquisition costs) compared to Yahoo (YHOO) to see if the street tries to imply that YHOO's TAC expenses are theirs alone or if the street says it is becoming widespread to all search. YHOO had total revenues of $1.576 Billion, but ex-TAC revenues were $1.123 Billion; yielding TAC expenses of $453 Million, or 28.7% of total revenues.

Jon C. Ogg
July 20, 2006
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