Google is set to kick off techland earnings for next week after the close of regular market trading tomorrow.
Wall Street expects Google to report $8.25 per share on revenues of $25.6 billion for the June quarter. Current Street consensus is for earnings of $8.45 per share on revenues of $26.7 billion for the current quarter ending in September.
Google is going to set aside the $2.74 billion fine levied by the European Commission (EC/EU) despite the fact that it has hired the top legal minds across the pond to fight the fine. The charge will be reported as a separate line operating item however given how the financial press tends to manufacture negativity any chance they get, investors should be wary of the headline risks. GAAP or no-GAAP, the fine is a one-time charge taken this quarter and has no bearing going forward. Of course, the EC/EU is also on a desperate quest to extract money from the best and the biggest techland companies in America, so the head-line grabbing fines and penalties on Google and the rest of techland will not stop in the foreseeable future.
Google shares are up 7.5% in the three months or so since the the day after the company reported results for its first quarter in 2017, on April 27, 2017. Google's shares are only slightly ahead of the QQQ's which are up 6.2% in that same period and the Nasdaq which is up 5.6% since then.
So, when the kindly uncles on the boob tube and in print caw about how Google is so far ahead of its index equivalents accompanied with the sweaty-palmed hand-wringing, feel free to shake your head and roll your eyes at them. Beating the Nasdaq by 1.4% in three months is hardly the signs of irrational exuberance.
Seriously though, Google can hardly be called a headache-free and easy investment thus far in 2017. First, the company was hit with the Youtube ad-related controversy which beat down the shares hard and then we had the June tech-wreck and then the massive EC fine with the overhang of further possible action by the bureaucrats across the pond.
One positive outcome of the company's move to reporting its financials on a GAAP basis could mean a lot more clarity for investors in areas like Youtube, OtherBets, Waymo et al if the company elects to provide more clarity as a result. We shall see.
According to data from market-research firm Merkle:
Google search spending growth was up 23% compared to the same quarter a year ago;
According to the company's findings, surprisingly, desktop spending growth in Q2:17 rose 22% year-on-year.
Google produced/accounted for 93% of US mobile organic search site visits and 89% of all organic search site visits in Q2:17.
Merkle also found that due to the mid-quarter change that Google undertook in its Ad Rank calculation, cost-per-click (CPC) growth was depressed in the quarter and brand keyword CPCs were actually down 8% in Q2:17 compared to the same period last year.
Finally, Merkle found that Google generates 97% of mobile paid search clicks in the US and 89% of all organic search visits.
With the EU fine and maybe more on the way from across the pond, the change to GAAP accounting reporting leading to the possibility of more details in Google's line-item and segment reporting and the company's continued dominance in search globally, tomorrow evening should be an eventful one for Google and its investors.
In addition, it will also be an exciting time for the dark-side as well which has been talking about techland overvaluation for years if not decades.
The question for both sides is whether Google shares react like the shares of Netflix or Microsoft post earnings?
Google is indicated to move roughly $44 per share, in either direction, in post-earnings reaction tomorrow.
Shares closed on Friday, July 21, 2017 at $993.84, up $1.65 per share on the day.
(Long googl, long and short googl options)