Google A Shares (NASDAQ:GOOGL)

CAPS Rating: 4 out of 5

So dominant it’s a verb, Google is the leading internet search provider and uses its proprietary algorithms to offer targeted advertising.

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Player Avatar aosgood (< 20) Submitted: 8/19/2011 12:00:11 PM : Outperform Start Price: $253.88 GOOGL Score: +58.11

The recent pullback in GOOG has occured because of economic turmoil and the company's expensive acquisition of Motorola. I believe this has created an opportunity, this is a fantastic company trading at a low price when you consider its earnings growth estimates - 17.81% for FY 2011 and 19.81% for FY 2012

Google is dominant in the search market, and has an ever expanding array of residual income generators like gmail, google+, etc. The Android OS now commands a larger market share than the iPhone. The acquisition of Motorola is questionable and risky, and needs to be carefully monitored. On the one hand, they may be isolating the partner companies who use the Android OS and putting stress on the Android ecosystem as a whole (despite promises to maintain the open-source nature of Android), on the other this could be the masterstroke the company needs to gain a true foothold on the mobile market.

Either way, the acquisition of 17,000 patents from Motorola improves Google's in the "patent war" with other technology giants like Apple, Microsoft, and Oracle. Earlier this month, Google complained that the above competitors were banding together to purchase patents used in the creation of smartphones. According to Google Senior Vice President and Chief Legal Officer David Drummond this allows competitors to enforce "a costly "tax" on each [phone produced] so that manufacturers deem it too costly and end up purchasing Windows Phone 7 or some other OS instead of Google's free, open-source mobile." Buying Motorola helps Google bypass these "taxes", and the acquisition may have been a good business move just for that reason. I believe there are many other positive things that can come of the acquisition (and negative things), and therefore will be keeping a close watch on how the whole process plays out and modifying my investment thesis accordingly.

Now that I have addressed what I think is the value aspect of this buy, it's time to look at the growth potential of the company. Google makes the vast majority of its money from online advertising: 96% in 2010. The search engine market has yet to penetrate fully in much of the world, including the world's second largest country: India. Google has pulled out of China because of censorship issues, and Baidu now commands that market, and the Russian search engine Yandex has a major share of its own market. Google needs to avoid any startup upsets in India if it wants to continue growing internationally. Beyond that, one only needs to take a look at analyst estimates to see Googles potential growth versus its competitors (also justifying its higher pricing), and I don't really have time to go into that right now.

As an investment I would like to see continuing growth in advertising revenues, expanding growth from Android, good things from the Motorola acquisition, and growth abroad. Bottomline, I feel like I am scooping up a great company at a relatively low price, and I expect Google to outperform greatly in the next five years as long as it hits on the points I've mentioned above.

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Member Avatar lukascranac (94.37) Submitted: 9/3/2011 7:52:08 PM
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"recent pullback" GOOG hit $700 in December 2007 went down with the crash in 2008 and never breached $600 ever since. Meanwhile other tech stocks have come back and been going up. imb, orcl, aapl, bidu, sap.. What is wrong with this stock?
L.

Member Avatar kpoeppel (< 20) Submitted: 9/22/2011 3:01:10 PM
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They pullout of of China.

That hurt them in the short term, but I think it was the right move for the longer term.

I'm long GOOG...they still have strong growth and a culture of creativity that is very rare in corporate America. They are late to the smartphone party, but they are catching up.

There's a lot of "headline risk" with this stock, so be careful out there. Buy on the dips.

Member Avatar baselineace (36.58) Submitted: 10/10/2011 10:29:35 AM
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Have you factored in the liability of the government cracking down on its tax haven scheme when it realizes it has no choice other than to tax these corporations?

Member Avatar soccerfool808 (< 20) Submitted: 4/1/2014 3:07:09 PM
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Very good assessment of Google. And you are correct that this is a good time to buy more, if you can afford it. They will be making more and more $$$$. Very Long on Google (Goog and Googl).

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