Below we present the earnings results of GOOG since 2007 and how the stock has reacted to them. We would note that since reported Q4 EPS results, GOOG shares have risen only 3%, with significant pressure on the stock with regards to GOOG pulling out of the China market, increased competition from Microsoft, and souring relations with Apple. We interpret the intra-quarter price change as implying muted expectations for GOOG’s Q1 results.
We rate Google High Risk, reflective of the highly competitive landscape thecompany faces, and the intrinsically-high valuation multiples of growth stocks,especially in the Internet sector. These risks are somewhat offset by the company's strong balance sheet ($24 billion-plus in cash) and by the liquidityof its shares. Note that the investment risks laid out below may impede thestock from reaching our target price. Specific risks include 1) very significantcompetition from Internet-related companies like Yahoo! and Microsoft; 2) alimited track record and limited visibility; 3) Risk to China business; 4) newbusiness line risk including mobile handsets, and operating systems; 5)potential exposure to concerns over aggressive industry online advertisingpractices; and 6) potential slowdown in online advertising due to macroeconomic conditions.If the impact on the company from any of these factors proves to begreater/less than we anticipate, it may prevent the stock from achieving ourtarget price or could cause our target price to be materially outperformed.
Google Inc _GOOG_ -
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