What Has Wall Street Been Saying About Google?

Google Inc GOOG GOOGL is scheduled to report its second quarter results after Thursday's market close. Estimize, the crowd sourcing earnings and economic platform, is predicting Google will earn $6.77 per share in the second quarter (based on 126 estimates) on revenue of $14.386 billion. This compares to the Wall Street consensus estimate looking for an earnings per share of $6.76 on revenue of $14.347 billion. Here is what some analysts were saying ahead of the print. BMO: ‘Incremental' Confidence In Estimate Revisions Daniel Salmon of BMO Capital Markets commented in a note on Thursday that his latest estimate revisions is "not a call on tonight's quarterly results" but a reflection of "increased confidence" in upward estimate revisions in the coming quarters. "We believe margin stabilization in 2H15 and 2016 will be less about a new CFO simply coming on board and more about Google already focusing its investment on key growth areas; combined with a steady revenue outlook, we believe this will drive multiple expansion as well," Salmon wrote. "That steady revenue view is underpinned by consistent (and lately underappreciated in our opinion) search growth and YouTube's continued push for TV ad dollars, where we believe it still has a considerable lead over emerging competitors, in large part due to the Google Preferred program." Salmon's second quarter earnings per share estimate of $6.74 remains unchanged, as does his full year 2015 $28.28 estimate. Looking forward to next year, the analyst raised his 2016 earnings per share expectations to $33.50 from a previous $32.43 as stabilization and expansion are expected to occur only over the next 12 to 18 months. Pivotal Research: FX Headwinds ‘Significant' In Q2 Brian Wieser of Pivotal Research Group commented in a note on Monday that Google faces "significant negative headwinds" from foreign exchange trends in the second quarter. However, the company's underlying growth "should continue as it has." Wieser also suggested that paid search is "probably decelerating somewhat" while also noting that several important drivers of Google's current quarter revenues remain "subject to significantly more guess-work." Credit Suisse: What Catalysts Can Change Investor Perception? Stephen Ju of Credit Suisse commented in a note in early July that shares of Google have underperformed the NASDAQ Composite index in the first half of 2015. Ju noted two of the more "oft-cited" pushback points against owning shares and offered his counter-point. Margin compression: Ju suggested that the aggravated revenue contribution from both YouTube and Google Play will rise from four percent of gross revenue in 2010 to 24 percent by 2020. In addition, a gross margin expansion at these two segments will represent a catalyst for near-to-medium term margin stabilization and eventually margin expansion. Lack of free cash flow: Ju pointed out that Google's capital expenditure has risen from $3.3 billion in 2012 to $10.8 billion in 2014 due to smart phone penetration and increases in consumer demand for Google's services. As smartphone penetration approaches and surpasses 50 percent, Google will likely continue investing to "stay ahead of that demand." The analyst suggested that now "there is greater likelihood" for capital expenditure stabilization and free cash flow growth resumption. "Following extensive checks with industry sources, we have recalibrated our model to assume a steeper gross profit dollar growth trajectory for YouTube as improved monetization via TrueView is set to drive net revenue (ex-CAC) growth in excess of bandwidth costs which we believe is more tethered to the growth of consumer engagement," Ju wrote. "As for Play we believe that Google is on the cusp of significantly surpassing revenue guarantees offered to its telco distribution partners and is hence also set to show greater operating and free cash flow contribution." Societe Generale: Is The Glass Half Empty Or Half Full? Christophe Cherblanc of Societe Generale commented in a note in June that it is "easy" to take opposing views on Google. On one hand, the company is losing share in the online ad market. The company's margins have also "flattened" due to continued investments, including non-core activities. Finally, regulatory pressure in Europe also adds a bearish element to the investment case. On the other hand, Google enjoys "unmatched resources" as it operates in a "growing ecosystem" resulting in "impressive" earnings per share and revenue growth for a company of its size. "Google's has a near-fanatical focus on providing a consistently fluid, high-quality user experience," Cherblanc wrote. "This has underpinned continued massive R&D expenses to improve search features/products and also investments in physical infrastructure. This approach is the best way to secure the company's core franchise, by avoiding the frustrations that may create windows of opportunity for an alternative search engine. In some cases, this entails projects like Android or Chrome, which are not revenues-generating per se (these operating systems are open source and free) but deliver strategic benefits."