Google missed street estimates on both the top and bottom line and was down 3.15% percent for Class C and 3.26% for Class A shares in the after-hours. The company held these losses throughout today's trading day and are down around the same amount. Revenue came in at $15.42BB missing analyst expectations that were around $15.5BB according to a poll by Thomson Reuters. Non-GAAP EPS (excluding a one time charge) came in at 6.27 dollars per share, again missing the street consensus of 6.40 dollars per share. Although the miss is disappointing and investors are not thrilled about the high spending on acquisitions that provide no clear path to adding shareholder value, it’s really difficult to find a large-cap tech company that can generate 19% revenue growth YoY. Traffic acquisition costs also fell sequentially as a percentage of revenue coming in at $3.233BB or 23% of advertising revenues, down from $3.311BB last quarter. Paid clicks were up 26% YoY but suffered a sequential decrease of 1%. Cost-per-click was flat sequentially and down 9% YoY.
Sites revenue was up 21% YoY coming in at $10.47BB. Network revenues from partner sites grew 4% and ended up at $3.4BB. Other revenues came in at $1.55 BB and were up 48% YoY. Gross margins also improved sequentially to 61.3% from 55.9% despite the uproar about rising costs.
Investors are clearly not happy with the miss but the numbers came in line with our projections and we still believe that there is upside ahead. The company had very strong revenue growth in its core business and is carrying a PE multiple right around 28x their trailing twelve months earnings. The forward multiple stands at around 23x NTM earnings. These multiples are not taxing considering the 35x PE multiple that the company was trading at just weeks ago. Consensus estimates also seem rather low for next quarter at 5.09 dollars per share on a GAAP basis according to Factset. In conclusion we do not think that the earnings numbers were bad at all, but the contracting multiples may be a reason to go ahead and take profits. A decision will be made soon upon further analysis.