| |
Google gets paid!
Posted By: IheartGOOG
Date: 4/18/08 at 2:03 p.m. EST
By John Letzing
SAN FRANCISCO (Dow Jones) - Google Inc. shares surged as much as 18% Friday, one day after the Internet-search company posted a 31% jump in first-quarter profit and dispelled many concerns about growth in its advertising business.
In early trading, Google (GOOG) shares climbed $78 to $526.64 as investors threw their support behind the stock in the wake of Google's late-Thursday earnings report.
For its first quarter, Google said net income for the period ended March 31 rose to $1.31 billion, or $4.12 a share, from $1 billion, or $3.18 a share, in the same period a year earlier.
Revenue rose to $5.19 billion from $3.66 billion.
Excluding special items, Google said that earnings for the period were $4.84 a share. Net revenue, or revenue minus payments made to other sites to acquire Internet traffic, came in at $3.7 billion.
Analysts had estimated Google would post earnings excluding special items of $4.55 a share and net revenue of $3.61 billion, according to FactSet Research.
Following Google's report, Jeffries & Co. analyst Youssef Squali raised his rating on Google's stock to buy from hold. Squali said that with 51% of its revenue coming from outside the U.S., Google has a lower exposure to the risk of a possible recession in the U.S. Squali alos asi that new "opportunities in display, video and mobile [markets] still provide ample headroom for Google to grow."
While the company had been expected to post solid profit and sales gains for the quarter, it also has faced growing concern recently about the growth in its paid clicks, or number of times users click on its sponsored search links and generate revenue. Google is only paid by its search advertisers when users click on such links.
Recent data from comScore Inc. has shown tepid paid-click growth during the first quarter, stirring concerns about the impact of the U.S. economic slowdown on Google and helping send its shares more than 30% lower between the beginning of the year and Thursday's earnings report.
Earlier this week, comScore reported that Google's paid clicks rose only 1.8% in the quarter compared with the period a year earlier, though its data don't include Google's international search markets.
Google said Thursday that its paid clicks actually grew 20% in the quarter compared with the period a year earlier.
"While growth did slow, it does not appear to be as significant as some feared," analyst Steve Weinstein of Pacific Crest Securities told clients.
However, Leland Westerfield, of BMO Capital Markets, was more cautious about segments of Google's report.
Westerfield, who holds a neutral rating on Google's stock, said that while the initially take on Google's paid-click ad growth will be seen at positive, "In due course, we belive Google's appreciation will be tempered,," by slowdown in revenue from searches done in the U.S.
During a conference call with analysts, Chief Executive Eric Schmidt noted that the paid-click growth was "much higher than has been speculated by third parties."
Google's 20% paid-click growth nonetheless marked a slowdown compared with the 30% growth in Google's previous, fourth fiscal quarter.
That's because the company, according to Collins Stewart analyst Sandeep Aggarwal, seems to be making the most out of the clicks that it's managing to get. "Maybe they are getting higher keyword prices from their advertisers. It was a beat quarter."
Aiming for quality
Google has argued that much of the slowdown in its paid clicks has been due to its own quality initiatives, such as reducing accidental clicks by shrinking the graphical format of search ads.
In addition, Google also has raised the cost for advertisers seeking to bid on some of the more attractive keywords, in an effort to wrangle a larger amount of revenue from a smaller number of clicks.
Schmidt did not directly address whether Google's advertisers are paying more per individual click. He did, however, say the following: "We know the value of clicks will grow, and at whatever rate the technology will allow. ... We're very optimistic that this model of staying focused on quality will give us the strongest ad network."
Schmidt responded to analysts' questions about the impact of the economic slowdown. "We do not see an impact as of this time," he said, adding that the company is "well positioned should economics change."
Google does not offer its own financial outlook. Analysts on average expect the company to post earnings for the full fiscal year of $19.64 a share, and $15.9 billion in net revenue.
Citigroup analyst Mark Mahaney wrote in a note shortly after Google's earnings were released that its "underlying fundamentals appear to remain intrinsically strong."
Mahaney also said that the paid-click deceleration "appears to be much more Large Numbers Law Trendline than feared," or limited only by the company's maturation and now-considerable size.
Part of that maturation has involved overseas expansion. Google announced that its international revenue reached $2.65 billion, or 51% of its total, compared with 47% of the total in the same period a year earlier.
In addition, Google said it has added 2,351 employees in the quarter. While analysts have criticized its rapid hiring clip in the past, Google said that 1,500 of the new employees in the quarter were associated with its acquisition of online-advertising firm DoubleClick, and that it has since eliminated about 10% of the DoubleClick workforce.
Google Chief Financial Officer George Reyes said that an additional 15% of DoubleClick workers "are expected to leave in the intermediate term" and are now serving in transitional roles.
(END) Dow Jones Newswires
04-18-08 1108ET
Copyright (c) 2008 Dow Jones & Company, Inc.
| |
Investing Forum is maintained by Admin with WebBBS 5.12.