Google Inc Class C (NASDAQ: GOOG)
Google had an amazing quarter in Q2. As a matter of fact, their earnings report was so positive that the company grew in market capitalization by $66.9 billion in a single day following the release of the report. However, investors invest for consistent growth; and some are starting to ask a major question… Can Google continue to grow earnings? After all, the last report creates even bigger expectations around the company; and if they can’t meet those expectations, they could realize the same fate as Apple following their next report. Today, I’ll provide a brief overview of what happened to Apple after earnings and why I don’t think Google will be in the same boat any time soon!
Apple Felt The Pain This Earnings Season
Apple (AAPL) did relatively well in the second quarter with regard to earnings. As a matter of fact the company was able to beat analyst projections with regard to earnings per share. Generally, when earnings are beat, shares raise in value. Unfortunately for Apple however, they became a classic “Victim of Success” story. You see, Apple’s iPhone growth has been substantial recently; and investors expected that substantial growth to continue. While they were able to beat earnings expectations, the company simply wasn’t able to hold the growth momentum in the smartphone space as iPhone sales came in lower than expected. So, in turn, their revenue dropped dramatically.
Some Experts Argue That Google Could Realize The Same Fate
This is where things get interesting. Some experts argue that Google has had incredible performance lately; raising the expectations of the company’s investors. After all, in the last quarter, the company produced $6.99 per share in earnings; smashing analyst expectations. Revenue was also higher than analyst expected to see and proved massive growth year over year. However, the question now isn’t whether or not Google will maintain profitability, the question has become whether or not the company will be able to maintain momentum moving forward. If not, we could see a massive decline in the value of the stock following one of the next few earnings reports. However, I don’t think that’s going to be the case.
Google’s Got Plenty Of Growth Left In Them
The reality is that Google’s growth is nowhere near over. Not only are more and more people using the search engine, the company is leading the way with regard to innovation in the online advertising space; generating massive revenues. As a result, the current growth forecast for this year is a whopping 12.6% with long term growth being an even more impressive 16.7%. Another thing that I think that’s important to point out is that just over the past month, we’ve seen analyst estimates for the current fiscal year grow by 3% based on what we saw in earnings and news revolving around the stock.
I think that the major difference here is that investors in Google don’t have a singular focus. While Apple investors may be hung up on the iPhone, Google investors take in all of the data; which is destined for growth. With that said, I don’t see Google being a victim of its own success any time soon. So, keep watching as this stock continues to climb in the long run.
What Do You Think?
Where do you think Google is headed and why? Let us know in the comments below!