Thursday, November 16, 2006

Google above $700 after 2007 Q1

Q4 should be able to grow Google's buttomline by 10% at least - as this
is the 2nd strongest Google/search quarter. However Q1 is going to be
the BIG Q as always for Google.. in Q1 you have 3 major months of
winter/media/Internet activity without any holiday season to take
peoples time away from media.

I see Google in $550-$600 in the first two weeks after Q4 come out
around 20th of January - and then at around $700 when the huge Q1 is
reported around 20th of April. My argument is simply that Google's P/E
does not get smaller than this (so the share can't fall without a fall
in profit) and the growth in Q4 and Q1 will push the share to $700
after Q1 is reported in April.

Monday, October 16, 2006

Buy Google, sell Yahoo!

This article is exactly my point. Read it buy clicking on the headline. Good work Rick Munarriz!

Tomorrow Yahoo! will post Q3 and on Thursday Google will. Expect Yahoo! to disappoint since they are still loosing market share to Google. Google in the other hand should do well from a growing online market of which they command a growing share. Also Google's substantial international revenue will be worth more this quarter since the dollar has been lower compared to Q2.

After this Q3 comes the two strongest quarters - Q4 and Q1. Expect Google to do very well in this period. Their annual growth is still around 80% while Yahoo!'s is around 20%. The difference says everything. Q4 is a banner quarter, but Google still does well here - while Q1 is bigtime search quarter.

Thursday, May 04, 2006

Yahoo! Should Run Adsense

Google DOES have by far the largest group of advertisers and there is
no sign of Yahoo! catching up. Also Google's Adsense is far better at
maximising return on the pageview than Yahoo!'s Overture is. Yahoo! has
even publically admitted - that they will not catch up on Google. So
why don't they just go ahead and run Adsense? I am sure that they could
get to keep around 90% of the revenue and I am sure that Yahoo! revenue
would increase dramatically if they did. Adsense just is better
capitalisation than Overture.

Advantage - Yahoo! shareholders would get a lot better return on their

Disadvantage - Yahoo!'s pride would hurt, and probably stand in the way
of this happening

Microsoft Will Lose To Google

Great article really! Dealing with the fact that this is a new game with new rules. Microsoft needs speed and friends - and has neither. Speed what do you mean? Vista will come out in no more than a year from now. Well - lets see about that.

Tuesday, May 02, 2006

The Reason Why Google Is Down: Big CAPEX

I read a great article called Capex Hits Big Techs by Cody Willard on He has a really good point and possible explanation to why Google is down - as is Microsoft. They are both really ramping up their spending on capital expenditure - hardware, infratructure buildings etc. And I remember that Eric Schmidt did point out in the Google Q1 statement that CAPEX would outgrow revenue for the rest of 2006. That of course reduces short term profit and can make some investors wary. However, I strongly believe that Google is investing in the right things and that these investments will pay of and keep Google ahead of the pack. Especially the idea of Google creating an alternative to the Internet is interesting. The more they grow (and they do a lot of that) the more reasonable the investment will be to them. If they can increase peoples use of Internet, they WILL increase their revenue. Its just a matter of time before the maths work out positively on this one and they will push ahead. Stay tuned for GoogleNet.

Monday, May 01, 2006

Google a bargain at $400

Ever since the day after Google reporting the record high 2006 Q1 the share has been trading down every single day - from $450 to now $400. Notice that this has been under small volume and therefore probably not as "bad" as it looks. There seem to be no apparent reason for this fall and the blogs and discussions boards (actually nice on Google Finance) also cry for a reason for this setback in the stock price.

Currently Google's EBITDA P/E is 29,7 only slightly higher than Yahoo!'s ditto at 26,1. It just does not make sense. Google by far is outgrowing both Yahoo! and MSN and should be traded at a larger premium. But then again - if you like bargains - I guess you have one now.

Today's story is Google complaining about Microsoft defaulting MSN Search in the new IE 7.0 browser - but Microsoft's defaulting of MSN in the browser has not stopped MSN from beeing a pathetic 3rd runner ever since it started out. I think Google can only rise from here!

Disclaimer: Buying stocks are full of risk - don't listen to me I could be very wrong yada yada yada..

Google EBITDA $1 Billion

For some reason Google did not report their EBITDA number - or at least for the first time I could not find it in their 2006 Q1 statement. I have found else where on the net, that it should be $1 billion. That is a pretty need number that gives them a yearly EBITDA growth on 83% versus Yahoo!'s EBITDA growth on a disappointing 26%. Why people still think that Yahoo!'s numbers where so great surprises me, because the numbers clearly show that Google is leaving Yahoo! seriously behind.

I expect Yahoo! to show yearly EBITDA growth going forward on 20%-30%, while Google probably will end up just north of 50% the next few years. Its still a high growth for the company, but obviously down from the previous EBITDA growth rates above 100%.

Added: This means that the growth from Q4 was 23% - where I was expecting 25%-30%.

Thursday, April 20, 2006

Google Above $500 Before June

If you read my last post, you see why Q1 is the biggest quarter by far for Google. Last year proved that as well. I believe that Google can show EBITDA growth 25%-30% higher than Q4 - where people search less due to the holiday season. Q1 is the three months were nothing obstruct people from doing a lot of searches - ask anyone who buys keywords on AdWords.

If Google DO grow EBITDA 30% - I believe the share could grow 30% as well, as expectations are intact (stay around same P/E level). The math is pretty simple: Current share price of $410 - ad 30% growth - ad the same P/E that gives us a share price of $533.

Last year Q1 growth was 45% over Q4 - I believe 30% is more realistic this year. It took 1,5 months for the share price to adjust 45% up last year - that is why I say "$533 before June".

Disclaimer: Buying equities are FULL of RISK.. make your own choice - and remember its your own responsibility. I have been wrong before - and I will be wrong again ;)

Wednesday, April 19, 2006

Q4 Is Banner - Q1 Is Search

I was very surprised to see the sharp selloff in Google after their Q4, which I think they did really well. But too many analysts thought that when Yahoo! had sold out their banner space then Google would also be making tons of money - wrong! This has nothing to do with each other. I will explain why in a second. Google did make a lot of money, but not enough to satisfy most analysts.

In Q4 two things happen:
  1. Most advertisers concentrate their spending here
  2. Internet usage starts to slow a little from mid November due to holiday season activities like shopping for presents, x-mas parties, religious functions etc. etc.
This means that the slightly lower inventory is quickly sold out on the biggest sites. Great if you sell banners like Yahoo! But Google feel the slight decline in search activity. They can't force users to search more. Also I can say from an advertising perspective that we don't necessarily change the price we are willing to pay for a click on Google's AdWords. I must confess that the product I work with (webhosting) not really is seasonal, but I believe that most advertisers have worked out the optimal price to pay for a click on Google. So when search activity is slowing up to Christmas, then less people click on Google's ads and in the end it means slower revenue growth for Google. This is for Q4 obviously.

What happens in Q1 is:
  1. Advertisers just spend most of their budgets in Q4 and so did most people - so demand for advertising is smaller
  2. Search has its prime quarter here - all three months have the heaviest search activity
When you know that most advertisers have an almost fixed price on their keywords on Google and search volume really climbs from Q4 - then you understand that Q1 really is the greatest quarter for the search business by far. Google proved it already last year, when their 2005 Q1 EBITDA rose 45% from their 2004 Q4 - a massive growth to say the least. Thursday night after market close we will see if they can do it again. Personally I believe that they will show a very strong quarter, but a smaller EBITDA growth than 45%. I expect Google to skyrocket in after hours sending it above $450.

You can see Google's Q1 announcement and webcast from here!

Disclaimer: Buying stocks and options are full of risk - make sure you make your own judgment and remember that it is on your own risk. Yada yada yada..

Thursday, April 06, 2006

Yahoo! was a sell at $42!

Of course that is easy to say now, when they are trading at $33, but back in November 2005 I said that Yahoo! was too expensive at $42 in November and was heading fast towards 30%-40% in yearly EBITDA growth (remember that Google has an EBITDA growth of 115% yearly).

When their Q4 came out they hit exactly 40% in yearly EBITDA growth, my guess is that when their Q1 comes out the 18th of April their yearly EBITDA growth will lie some where between 30% and 35% - probably closer to 30%. The money is in search advertising for very good reasons (that's were the buyers for advertisers products are) and Yahoo! is continuously loosing share to Google.

Personally I would not be buying Yahoo! above $26 (EBITDA P/E = 20). They are simply loosing to much ground to Google plus they have officially conceded their efforts in search. Their target is now to hold on to their market share, but even that seems too optimistic. When their growth soon will be 30% yearly on EBITDA and might even move lower - why pay a high P/E?

One thing that could work a little positive for Yahoo! is their new project to include text ads clickrate in their ranking. Instead of now where it is only how much an advertiser will pay per click. This will improve the revenue from their search listings. It should be rolled out at the end of 2006 - beginning of 2007. I have always wondered why they did not copy this clever thing from Google immediately, but maybe Yahoo! has been sleeping for too long.

Google to supply free Wi-Fi in San Francisco with Earthlink

Another great news for Google! Sure this is not the final decisive battle - but a really important head start on the way to develop a business model, where Google can make tons of money on local ads and develop new services! And even though they say that they will only concentrate on SF because all their employees live there and HQ hometown - then don't believe it. Its like when they told Yahoo! they would concentrate on being a search engine..

Google is here to make money - and its OK with me. And make money they will, when they blanket USA and later the rest of the worlds populated places with free Wi-Fi. The cost of providing it will go down each year, and the money to be made is going to go up each year. I believe that it will be a profit even from the start. A few years down the road it will become extremely profitable for Google. Remember that Google today generate about 1/3 of all online revenue, so even before they develop new services based on knowing peoples exact location and before serving local ads again based on location (which the competition won't be able to) they will actually make a lot just from the Internet usage rising because of free access!

Friday, March 24, 2006

Google to Replace Burlington on S&P 500

Google to Replace Burlington Resources on S&P 500 After Trading Close on March 31!

This is great news for all Google investors as mentioned earlier, since more fund managers will need to buy into the stock, because they benchmark their fund against S&P 500. This will have a positive impact on Google's share price.

And this is exactly what happened in after hours trading. Google surged 31,61 to 373,50 a jump on 9,25%!