Google Rallies on Strong Q2 Earnings

On Thursday, Google

reported second-quarter earnings. The company increased revenue across all divisions. Google reported total revenue of $12.21 billion, up from $9 billion from last year. It announced an EPS of $10.12, higher than the consensus analyst estimate of $10.16. “Google standalone had a strong quarter with 21% year-on-year revenue growth, and we launched a bunch of exciting new products at I/O – in particular the Nexus 7 tablet, which has received rave reviews,” said the company's CEO Larry Page. On a year-over-year basis, advertising on Google owned sites - the largest segment of its business - was up 21%. Google's advertising division makes up around 90% of consolidated revenue. Overall clicks or Paid Clicks of Google's search ads were up 42% in the quarter. The company continues to make progress in mobile advertising, with more than 1 million advertisers for its AdMob project. Network or partner sites revenue was 20%, while international revenue was up 54%. Cost per Click decreased 16%. Google completed its acquisition of Motorola Mobility on May 22. It indicated that there will be some fluctuation in revenues as they continue to integrate. The Motorola division reported an operating loss of $233 million for the quarter. Management cited successful past integrations to ease investor concerns. Fundamentals are good for the world's largest search engine. Current price-to-earnings valuation is a little more than 18, trading under 12 times next year's earnings. The company has seen strong sales growth and it has almost no debt in addition to about $43 Billion in cash. Google has been trading in a somewhat bearish wedge, perhaps because traders are concerned about the new CEO Larry Page. It appears as though the company is threatening to breakout above the 200 day moving average. The bearish cycle may be in the past and a new accumulation phase can begin.