Thursday, July 24, 2014

Google 2Q 2014 Earnings Call

Google Corporation posted revenues of $15.9 BB and non-GAAP EPS of 6.08 dollars per share. Consensus was at 6.24 for EPS and 15.6 according to Thompson Reuters. The stock appreciated in after-hours trading and the gains stuck as the Class A shares rose and stayed above 600 the following week. Analysts were impressed by the strong revenue growth of 22% YoY and the company beat estimates on another number as well. This number, traffic acquisition costs (TAC), came in at $3.29 BB. This represents 23% of revenues and Google's revenue minus TAC came in around $500 MM above consensus estimates. 

Paid clicks were up 25% YoY and cost per click was down 6% YoY and flat QoQ. To see this metric flat QoQ was another great indicator. 

Google sites revenues were up 23% YoY and came in at $10.94 BB. Network revenues were up 7% YoY coming in at $3.42 BB. Other Revenues came in at 1.6 BB, up 53% YoY. 

It seems like investors are becoming comfortable with Google's long term strategies and investments as the stock has been strong even with an earnings miss. All the drama surrounding the Nest recall has also appeared to have had minimal impacts on Google's results. Google may be leading the way towards technological advances worldwide and can easily be considered undervalued at these levels where revenue growth is consistently around 20% each quarter. Google has been swallowing various other companies with relatively minimal effects on the financial results. Of course expenses have been trending up but the company has proven that it can afford to invest for the future today. With growing ad revenues and the various other avenues for growth becoming available, we recommend a hold on the company with a price target around 700.

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