Thursday, April 15, 2010

Google Inc (GOOG) Neutral First Take On Q1 Results[citbank research] $GOOG

Image representing Google as depicted in Crunc...
Google Inc (GOOG)
Neutral First Take On Q1 Results
  • GOOG Reported A Modest Beat Q1 — $5.06B in net revenue & $6.76 in non-GAAP EPS vs. our/Street estimates of revenue of $5.07B/$4.93B & EPS of $6.71/$6.56. 2% Q/Q net revenue growth was a tad light vs. high-end market expectations for 3% Q/Q growth.
  • Improved Fundamental Trends – Organic Y/Y gross revenue growth (excluding FX & Hedging) of approximately 22% accelerated vs. Q4’s 16%. And $2.78B in non- GAAP op. income came in ahead of our $2.75B est and increased 29% Y/Y (decent measure of organic bottom-line growth). PF Op. margin of approx 54.9% (vs. our 54.2% est.) was up approximately 180 bps Y/Y and down 80 bps Q/Q.
  • Biggest Revenue Upside From “Other” Revenue — Google's own Gross Website revenue came in at $4.44B – $71MM or 2% below our est. Google’s Gross Network revenue came in at $2.04B – $28MM or 1% below our estimate. Network TAC came in at 71.0%, 100 bps below Q4 and about 150 bps below our est of 72.5%. However, O&O TAC inched up 30 bps vs. Q4 to 6.0%. Other revenue came in at $300MM, vs. our $256MM estimate (possibly from NexusOne & DCLK licensing sales). The Other Revenue and Network TAC results are a positive, but O&O and Network Revenue were somewhat weaker than expected.
  • Paid Click Trends A Key Positive; CPC Growth Less Than Expected — Paid click growth of 15% Y/Y compared with Q4’s growth of 13% and Q3’s growth of 14% and was ahead of our 12% Y/Y expectation. Reported CPCs were up 7% Y/Y vs. up 5% Y/Y in Q4, and below our 14% Y/Y growth estimate. U.S. Gross Revenue was up 1% Q/Q – vs. our expectation of (1%) – while reported International Gross Revenue was up 2% Q/Q – vs. our expectation of 6%. UK revenue grew 15% Y/Y, vs. our 19% Y/Y expectation. All in, International Gross Revenue (ex FX & Hedging) grew 22% Y/Y, up from Q4’s 21% Y/Y growth.
  • Neutral First Pass – Tho Paid Click Trends Signal Possible Inflection Point — Q1 results beat consensus estimates, but came in shy (again) of high-end expectations. Overall results were generally in-line with our estimates. We believe GOOG shares have material valuation support here.

Neutral First Take On Q1 Results

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