The market continued to drive down the share price of internet search goliath Google (NASDAQ: GOOG), which accelerated last week after a near-miss of expected earnings from their earnings report. When the search company reported Thursday, January 31, after the bell, $4.43 per share on revenue of $339 billion, excluding stock given to employees, the market reacted sharply. Estimates had pegged the Google forecast at $4.44 per share, with expected revenue of $345. After-hours trading saw swift punishment for the disliked report, as the stock was taken down from its close of 564.30 to an opening on Friday of 528.67, a shedding of over 6%. The stock had been down as much as 9%, but came back slightly.
Although the earnings report wouldn’t seem to warrant such a sell-off, of greater concern to the market was the whiff of a slowing growth rate for the company. The market has become nervous, what with a year of multiple subprime revelations, the collapse of homebuilding, and the beginning of pullbacks in consumer spending along with the cry of recession, so it didn’t take much to create a selling climate for the stock.
While Google has led the way in monetizing online advertising, analysts are concerned that rising costs of acquiring that advertising will pressure gross margins. Analysts note that Google may have to make increasing guaranteed payments to other sites it owes in advertising deals. The company does not provide guidance, but analysts’ estimates for earnings still see the company in the $20 range for the full year 2008, which would put the growth rate well over 40%.
The stock peaked at 747 in November, after having been as low as $437 in the last twelve months, but has been sliding, with its January numbers in the mid 500s until the massive sell off began after the earnings report release. Whether this is technical distribution (i.e., selling) after a major run-up since the stock went public in 2004 (the chart shows almost an unabated rise deep into 2008), or if this is the reaction to news that presages a new more difficult climate for growth for Google, is difficult to say.
The news of Microsoft’s (NYSE: MSFT) attempted takeover of number two internet search engine company Yahoo (NASDAQ: YHOO) further poured more gasoline on the selling fires. Microsoft has stated repeatedly it will challenge Google in the lucrative search engine arena. Google stock closed today at $495.43, down 20.47.
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