Google Stock Analysis Compiled by Kampamba Shula

Google Stock Analysis

 

In case you didn’t know Google recently surpassed Microsoft in terms of Market capitalization to become the second largest Tech firm behind Apple. This brought a greater urgency to analyze Google’s stock performance as well as it could be one the best performers of 2012. Google is worth more than Microsoft on paper for the first time since Google splashed onto the technology scene in 1998, marking a financial milestone for the search engine company as it continues to grow.

 Google's stock price rose 1 percent to $761.78 at the close of the stock markets in New York on Oct. 1, for a market capitalization of about $249.9 billion, according to a report from Bloomberg BusinessWeek. That's higher than the $247.2 billion stock valuation for Microsoft, which fell less than 1 percent to $29.49 per share, according to Bloomberg.

 Among technology companies, though, both Google and Microsoft still trail Apple, which is ranked first in market valuation at $618.1 billion. Apple's valuation topped Microsoft's back in 2010 as iPhones and iPads began their marches to sales successes.

 

Description

 Google Inc. (Google) is a global technology company focused on improving the ways people connect with information. The Company generates revenue primarily by delivering online advertising. As of December 31, 2011, the Company’s business was focused on areas, such as search, advertising, operating systems and platforms, and enterprise. Businesses use its Ad Words program to promote their products and services with targeted advertising. In addition, the third parties that comprise the Google Network use its AdSense program to deliver relevant advertisements that generate revenue. In June 2011, it launched Google+. In September 2011, the Company acquired Zagat. In May 2012, Google acquired Motorola Mobility Holdings, Inc. As of January 2012, over 90 million people had joined Google+. In April 2011, the Company acquired Push Life. On July 31, 2012, it acquired marketing start-up Wildfire. In September 2012, it acquired Virus Total and Nik Software.

In addition, it offers Android, an open source mobile software platform; Google Chrome OS, an open source operating system; Google Chrome, a Web browser; Google+ to share different things online with different people; Google TV, a platform for the consumers to use the television and the Internet on a single screen; and Google Books platform to discover, search, and consume content from printed books online. Further, the company provides Google Apps, a cloud computing suite of message and collaboration tools, which primarily includes Gmail, Google Docs, Google Calendar, Google translate, and Google Sites; Search Appliance, a search technology for use within enterprises; Google Site Search, a custom search engine; Google Commerce Search for online retail enterprises; Google Maps Application Programming Interface for businesses; and Google Earth Enterprise, a firewall software solution for imagery and data visualization. Google Inc. was founded in 1998 and is headquartered in Mountain View, California.

Growth Opportunities and Success

 

Google’s stock price has climbed steadily this year as the California-based company bolstered its positions in key Internet growth areas with its dominant search engine, Android mobile operating system and YouTube video venue.

 The shares got a boost last week from a Citigroup note advising investors that the Google stock price could “rise significantly in the 12 months ahead.” A note Monday from Trip Chowdhry at Global Equities Research said both Google and Apple have “strong momentum” in the mobile Internet sector while “developer interest in Windows Phone is almost non-existent.” Chowdhry added that Google’s “innovation velocity far exceeds any other company.” Enthusiasm for Microsoft has been lukewarm, despite its upcoming launch of the Windows 8 operating system and a push into the tablet and phone markets.

The latest data from technology research firm comScore, Inc. (NASDAQ:SCOR) revealed that Google Inc (NASDAQ:GOOG) and Samsung Electronics Co., Ltd. (LON:BC94) maintained their position as leaders in the smartphone market.

 During the three month period ending in August, the survey found that Google’s Android operating system is the number one smartphone platform in the United States, with 52.6 percent market share, a 1.7 percent increase from its previous market share of 50.9 percent in May.

Apple Inc. (NASDAQ:AAPL) is 18.3 percent behind Google Inc (NASDAQ:GOOG) with 34.3 percent market share. The company’s market share increased by 2.4 percent during the three month period, compared with its previous 31.9 percent market share in May. The data also indicates that both technology giants Apple and Google are absorbing the market shares of RIM, Microsoft, and Symbian as the companies continue to lose market share.

Valuation

Valuation Measures

 

Market Cap (intraday)5: 247.56B Enterprise Value (Oct 3, 2012)3: 213.96B Trailing P/E (ttm, intraday): 22.44 Forward P/E (fye Dec 31, 2013)1: 15.37 PEG Ratio (5 yr expected)1: 1.19 Price/Sales (ttm): 5.74 Price/Book (mrq): 3.82 Enterprise Value/Revenue (ttm)3: 4.96 Enterprise Value/EBITDA (ttm)6: 13.85

 

The Forward P/E ratio still gives us a good incentive to assume that Google still poses immense growth opportunities in the near future. The price to book value also looks decent given its market cap.

Threats and Weaknesses

 

Analysts say Google is simply putting its fingers in too many pies. Forays into television, Android mobile phones and music sales in the past two to three years have left the investment community straining to recognize the company.

For Google to keep growing, it needs access to a wider range of content on which it can place ads and make money, particularly as the tech landscape shifts and consumers' Internet habits evolve.

 

"Any walled-off content is the enemy of Google, so they're trying to pry it open. They did it well with Android, they're trying it with social media and they're trying it with television," said MIT Sloan School of Management Professor Michael Cusumano.

The strategy is not cheap, requiring significant investments for Google to build or buy platforms to reach new content -- adding pressure on the bottom line. And many of the new markets may not be as profitable as the search ad business where Google rules the roost, said Cusumano.

Google does not disclose how much money it has spent on Google+. But analysts believe much of Google's aggressive hiring during the past year -- its headcount swelled to more than 8,000 employees in 2011 alone -- was to feed its social efforts as it seeks to challenge Facebook's 800 million user network.

With mobile and display representing greater portions of Google's business, some say the time has come for the company to be more forthcoming to push its price/earnings multiple higher.

"If they want multiple expansion they need to provide more clarity," said National Alliance Capital Markets analyst Mike Hickey. "If someone asks them how's an aspect of the business 'terrific' just doesn't cut it anymore."

It is, however, unlikely that Google will go so far as to provide financial forecasts -- a practice the company has shunned since its earliest days.

But more consistent and detailed reporting of some of its key businesses could bolster Wall Street's faith in the company's prospects outside search, and quell some of the persistent anxiety about its spending.

Summary

In short Google is a wonderful company and investment with scary growth potential given that it seems to want to acquire any advertising platform possible.This aggressive tactic seems to confuse investors who fail to recognise the new Google.

In my personal view this strategy by Google is pure genius,quite risky but its pure genius.Apple may have the niche market for now and Microsoft the legacy but Google wants everything and I mean everything.