{"id":210538,"date":"2010-01-21T15:56:00","date_gmt":"2010-01-21T20:56:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/google-q4-2009-earnings-analysis"},"modified":"2010-01-21T15:56:00","modified_gmt":"2010-01-21T20:56:00","slug":"google-q4-strong-but-not-the-blowout-wall-street-wanted-goog","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/210538","title":{"rendered":"Google Q4 Strong But Not The Blowout Wall Street Wanted (GOOG)"},"content":{"rendered":"<p><img decoding=\"async\" class=\"float_right\" src=\"http:\/\/static.businessinsider.com\/image\/237a6c79f49f2048f553f500\/larry-page-white-coat.jpg\" border=\"0\" alt=\"Larry Page White Coat\" \/><\/p>\n<p><a href=\"http:\/\/finance.yahoo.com\/news\/Google-Announces-Fourth-bw-1494986121.html?x=0&amp;.v=1\"><span style=\"color: #ff0000;\"><\/span><\/a><\/p>\n<p><span style=\"color: #ff0000;\"><span style=\"color: #000000;\">Overall, solidly ahead of expectations.&nbsp; Not a blowout.&nbsp; EPS comfortably ahead of estimates, revenue just ahead. Stock getting clobbered&#8211;Wall Street&#8217;s dreams were ahead of reality. (<a href=\"http:\/\/finance.yahoo.com\/news\/Google-Announces-Fourth-bw-1494986121.html?x=0&amp;.v=1\">Releass here<\/a>.)<br \/><\/span><\/span><\/p>\n<p><span style=\"color: #ff0000;\"><span style=\"color: #000000;\">Company very healthy.&nbsp; Free cash flow was once again astounding: $2.5 billion for the quarter, for an annualized run-rate of $10 billion a year.&nbsp; <\/span><\/span><\/p>\n<p><span style=\"color: #ff0000;\"><span style=\"color: #000000;\">Excluding $25 billion of cash (!), the company is trading at about 16X run-rate cash flow.&nbsp; Not cheap by any means, but reasonable.<\/span><\/span><\/p>\n<p><span style=\"color: #ff0000;\"><span style=\"color: #000000;\">The biggest issue for the company now is China: After clumsily giving the Chinese government a black-or-white ultimatum, Google may actually have to withdraw from the biggest future opportunity in the world.&nbsp; Needless to say, this would be a big negative.<\/span><\/span><\/p>\n<p><strong>Key Stats: <\/strong><\/p>\n<ul>\n<li><strong>Net Revenue $4.95 Billion <\/strong>versus $4.9 consensus (modest upside)<\/li>\n<\/ul>\n<ul>\n<li><strong>Non-GAAP EPS $6.79<\/strong> versus $6.45 consensus (nice upside)<\/li>\n<\/ul>\n<ul>\n<li><strong>Non-GAAP Operating Income $2.76 billion <\/strong>versus consensus of $2.68 Billion (nice upside)<\/li>\n<\/ul>\n<ul>\n<li><strong>Paid clicks up 13% (fine)<\/strong><\/li>\n<\/ul>\n<ul>\n<li><strong>Cost per click up 5% (fine).&nbsp; <\/strong>Lots of room for this to increase if the economy really recovers.<\/li>\n<\/ul>\n<p>Conference call starts at 4:30 PM ET.&nbsp;<a href=\"http:\/\/investor.google.com\/webcast.html\"> Listen here &gt;<\/a>&nbsp;&nbsp; Google&#8217;s actually also doing a world-first, <a href=\"http:\/\/www.youtube.com\/GoogleIR\">streaming the call on YouTube: <\/a><\/p>\n<p>Here are the slides:<\/p>\n<p><iframe loading=\"lazy\" width=\"410\" height=\"342\" frameborder=\"0\" src=\"http:\/\/docs.google.com\/present\/embed?id=djnx46b_129hb3437c6\"><\/iframe><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"text-decoration: underline;\"><strong>CONFERENCE CALL NOTES:<\/strong><\/span><\/p>\n<p><strong>Eric:<\/strong> blah blah great quarter blah blah blah.<\/p>\n<p>Decision to start ramping investment in Q3 smart (yes)<\/p>\n<p>Enterprise business &#8220;very strong.&#8221;&nbsp; (Really?&nbsp; Details, please)<\/p>\n<p>Faint praise for Droid, Nexus One.<\/p>\n<p><strong>Patrick:<\/strong> Read the press release.<\/p>\n<p><strong>Jonathan:<\/strong> &#8220;YouTube is monetizing well.&#8221;&nbsp;&nbsp; (Need details here).<\/p>\n<p>Will be making all products &#8220;more social&#8221;.&nbsp; (Haven&#8217;t been good at this so far).&nbsp; Recommendations from your friends, etc.<\/p>\n<p>[Have to drop off.&nbsp; Jay Yarow <a href=\"http:\/\/www.businessinsider.com\/live-discussion-of-googles-q4-results-2010-1\">covering call and leading live discussion here &gt;<\/a>&nbsp; Thanks for joining!<\/p>\n<hr \/>\n<p>&nbsp;<\/p>\n<p><span style=\"text-decoration: underline;\"><strong>PREVIEW<\/strong><\/span><\/p>\n<p><strong>The Bottom Line:<\/strong> Google&#8217;s stock has been hit in the past week on the company&#8217;s ultimatum to China (in which the company<a href=\"http:\/\/www.businessinsider.com\/henry-blodget-how-chinese-citizens-make-fools-of-government-censors-and-google-for-leaving-2010-1\"> clumsily backed itself into a corner<\/a>).&nbsp; The core business, however, appears to be recovering strongly, and the market is&nbsp; counting on strong results.&nbsp;<\/p>\n<p>Specifically, the market expects the company to beat consensus estimates of $4.9 billion in revenue and $6.45 in EPS.<\/p>\n<p>Most investors are expecting sequential revenue growth in the 10%-11% range.&nbsp; Anything below that will probably hammer the stock.&nbsp;&nbsp;<\/p>\n<p><strong>Background:<\/strong> At $575, the stock is priced at about 22X 2010 earnings, which is below historical levels of about 30-times, but still pretty rich for a company this huge.&nbsp;<\/p>\n<p><strong>Key Consensus Estimates: <\/strong><\/p>\n<ul>\n<li><strong>Net Revenue $4.9 Billion <br \/><\/strong><\/li>\n<li><strong>Non-GAAP EPS $6.45<br \/><\/strong><\/li>\n<li><strong>Non-GAAP Operating Income $2.68 Billion&nbsp;&nbsp;<\/strong><\/li>\n<\/ul>\n<p>Here&#8217;s a quick outlook from JP Morgan&#8217;s Imran Khan:<\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"padding: 0pt 0pt 0pt 5px; margin-top: 0em; margin-bottom: 0.5em; font-size: 13px;\">\n<p style=\"text-align: left; font-size: 13px; color: #000000;\"><img border=\"0\" alt=\"*  \" vspace=\"2\" width=\"0\" height=\"0\" \/><strong>We see net revenue of $5.11B. <\/strong>This implies Q\/Q revenue growth of 16.6%.  We see the US market growing 10% Q\/Q.<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"padding: 0pt 0pt 0pt 5px; margin-top: 0em; margin-bottom: 0.5em; font-size: 13px;\">\n<p style=\"text-align: left; font-size: 13px; color: #000000;\"><img border=\"0\" alt=\"*  \" vspace=\"2\" width=\"0\" height=\"0\" \/><strong>We expect aggregate paid click growth of 12% Q\/Q or 16% Y\/Y. <\/strong>This is a slight acceleration from the 3Q growth rate of 14% Y\/Y and roughly in line with 2Q&rsquo;s 15% growth and 1Q&rsquo;s 17% Y\/Y growth.<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"padding: 0pt 0pt 0pt 5px; margin-top: 0em; margin-bottom: 0.5em; font-size: 13px;\">\n<p style=\"text-align: left; font-size: 13px; color: #000000;\"><img border=\"0\" alt=\"*  \" vspace=\"2\" width=\"0\" height=\"0\" \/><strong>We see EBITDA margins declining. <\/strong>We are modeling an EBITDA margin of 61.9%, down 130 bps sequentially but up 190 bps Y\/Y. During the call, we will be looking for color on our expectations for an increased cost structure in 2010 due to acquisitions, increases in headcount, and product and infrastructure investments.<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"padding: 0pt 0pt 0pt 5px; margin-top: 0em; margin-bottom: 0.5em; font-size: 13px;\">\n<p style=\"text-align: left; font-size: 13px; color: #000000;\"><img border=\"0\" alt=\"*  \" vspace=\"2\" width=\"0\" height=\"0\" \/><strong>We are modeling a pro forma EPS of $6.85. <\/strong>This implies 34% Y\/Y growth which is an acceleration from 20% growth in 3Q. We think this is reasonable given our expectations for 21% Y\/Y net revenue growth and Y\/Y costs increases of less than $300M. We are modeling CapEx of $400M, compared to $368M in 4Q&rsquo;08 and $186M last quarter.<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"padding: 0pt 0pt 0pt 5px; margin-top: 0em; margin-bottom: 0.5em; font-size: 13px;\">\n<p style=\"text-align: left; font-size: 13px; color: #000000;\"><img border=\"0\" alt=\"*  \" vspace=\"2\" width=\"0\" height=\"0\" \/><strong>Commentary to watch for. <\/strong>We will be listening for insight into ad budget trends, CPC levels, strategic investment and infrastructure needs, an update on the China operations, and insight into the mobile device strategy.<\/p>\n<\/li>\n<\/ul>\n<p>Here is a snapshot from Citi analyst Mark Mahaney:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/static.businessinsider.com\/image\/4b5877b800000000000f825b\/google-earnings-cheat-sheet.png\" border=\"0\" alt=\"Google Earnings Cheat Sheet\" width=\"620\" height=\"272\" \/><\/p>\n<p><a href=\"http:\/\/www.businessinsider.com\/google-q4-2009-earnings-analysis#comments\">Join the conversation about this story &#187;<\/a><\/p>\n<p><b>See Also:<\/b><\/p>\n<ul>\n<li><a href=\"http:\/\/www.businessinsider.com\/google-nexus-one-apple-event-2010-1\">Google&#8217;s Nexus One Presentation Was Terrible &#8212; Here&#8217;s What They Did Wrong<\/a><\/li>\n<li><a href=\"http:\/\/www.businessinsider.com\/google-q4-2009-earnings-preview\">Google Q4 Earnings Preview: Better Be Big To Drown Out The China Problem<\/a><\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/TheMoneyGame\/~4\/SAuLRdEv9fM\" height=\"1\" width=\"1\"\/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Overall, solidly ahead of expectations.&nbsp; Not a blowout.&nbsp; EPS comfortably ahead of estimates, revenue just ahead. Stock getting clobbered&#8211;Wall Street&#8217;s dreams were ahead of reality. (Releass here.) Company very healthy.&nbsp; Free cash flow was once again astounding: $2.5 billion for the quarter, for an annualized run-rate of $10 billion a year.&nbsp; Excluding $25 billion of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-210538","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/210538","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=210538"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/210538\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=210538"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=210538"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=210538"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}