Hey everyone,
As expected the stock market rallied yesterday. However, Google dropped from $452/share at open to 420/share at close - underperforming the Nasdaq by 6%. Actually, since the Nasdaq is weighted by market capitalization, Google's decline likely represented one of the reasons why the Dow Jones was up 2.6% while the Nasdaq was up only 0.6%.
Anyway, every business journalist, analyst, investment bank, and underground troll was trying to explain why Google was declining. Here are the reasons below (and why they are wrong) :
1) The dollar is getting stronger so Google makes less off its international business
- This is been happening for about 2 months now. You don't honestly believe that traders decided to make that their excuse to sell today, do you?
2) They are vulnerable to the consumer slowdown.
- Ummm....we've know that for awhile, the current Fannie and Freddie take over only make the consumer slowdown less likely to become a depression, so this isn't the reason.
3) Multiple Contraction - That is, people are speculating in it less because they don't think its going to have high growth - this is related in part to the consumer slowdown rationale above
- Multiple Contraction is really how financial journalists say, "We have no idea what is going on"
So what is the real reason why Google dropped today when everything else was rallying?
A press release from the association of national advertisers - an organization which represents a lot of big companies - Coca-Cola, Exxon, etc. - saying that it strongly opposes the Yahoo-Google advertising alliance
Its funny, yesterday on the ICM conference call, I was talking about how Google seems to be immune from prosecution from anti-trust because the product it offers is free to consumers. Google has somehow managed to look like a benevolent organization which offers all of its products free to consumers. I thought, unless businesses bind together and work against Google, this search company can have a defacto monopoly.
Now, Google needs to hire lobbyists. Lobbyists will make them look bad. Google and Apple have been able to maintain their clean image because they haven't gone to court over anything. While privacy issues have come about, Google has never really had to fight for marketshare in the courts. They've only use their engineering abilities to steal that from Yahoo. Now, when they start using legal efforts - they become "the man". This is bad press for Google. Perhaps they will be able to shrug off the critisim, but its not guaranteed. Even Apple and Steve Jobs were able to get out of the options back-dating issue relatively unscathed. But that's probably because no one understands what options backdating IS.
Everyone knows what a lobbyist is. Everyone knows what the word "Antitrust" means. When they get associated with Google....then Google becomes evil. Google becomes Goliath.
People pay a huge premium for Macs even though their functionality is no better than a PC. Sure they might have a shiny interface, but deep down, they are all the same. Google is much the same way. Maybe the search results are a little better, but in the grand scheme of things, you pretty much find what you want with Yahoo or MSN or Ask.com. But if you make Google look evil - the dedicated anti-"The man" fan base may start moving away.
That's why Google stock went down. Not "multiple contraction"
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Disclosure: Intigril Capital Management in long Microsoft at the time of publication of "Analysts Go Googly Eyed"
Showing posts with label Google. Show all posts
Showing posts with label Google. Show all posts
Tuesday, September 9, 2008
Sunday, July 13, 2008
One of the Four Most Wonderful Times of the Year!
Oh yes,
The air is crisp (with fear), the green is around us (perhaps leaving our bank accounts), and blue skies (or blue faces) are never ending.
Yes, earnings season is here. One of the four periods of the year, spanning about 3 weeks, where every company's CEO has to get on a conference call and fess up to the shareholders the fact he/she has spent way too much time on the golf course. This week we are going to find out about Google, Ebay, Microsoft, AMD, Apple, IBM, Citigroup, Coca-Cola, JPMorgan, US Bancorp, Wells Fargo, State Street, and much more.
Generally, you see sell offs before an earnings week because day traders pull all their investments out to avoid any major surprises.
What did you think - the Dow hitting 11,000 on Friday was for no reason?
The value investors (such as Intigril Capital Management) stay in because earnings reports validate our predictions (and our total assets). I can't wait to listen to the conference calls of the above mentioned companies and find out what .0005% shortfall in some obscure earnings metric causes a company's stock to plummet by 33%.
So below are a few of my predictions for select companies/sectors:
Microsoft:
I expect results that would have normally sent the stock going up. However, with the YHOO-MSFT merger any good news is probably going to be obscured by uncertainly surrounding the Icahn proxy fight.
Verdict: It's definitely not going down, but it may not go up, even with stellar results.
Google:
It's going to move. Hard and fast. Right now, Google has become a speculative short target because Google has never had to face a recession. However, their results last quarter blew the doors off and everyone shorting Google lost a lot of money. However, economic conditions have deteriorated significantly. Google may not be invincible. I wouldn't be surprised if the stock moved down, hard and fast. But with the best nerds and a determined management, its likely to go up.
Verdict: Big move. Likely up 8-13% , but a fall is still a possibility, and if it does happen, were talking about 15-20%
Coca-Cola
A energy drink company called Hansen Natural reported weak sales at convenience stores. I expect Coca-Cola to be hit by this trend as well. Word on the street is that they are making heavy discounts on their soda at gas stations to spur impulse buys. So either the market is going to get mad at the margins if this discounting rumor is true and if its not true, its going to get massacred because of declining revenue.
Verdict: Neutral to Negative. Some metric is going to upset someone. But they might be already be expecting it. Just don't expect this stock to react more than a percent or two in the positive.
Ebay:
I have yet to figure out what global market forces cause this company's stock to do well. You would think that maybe they would get increased revenues from liquidation companies during economic downturns, but this is likely counteracted by decreased revenue from long-standing businesses because of consumer spending slowdowns.
Verdict: No clue. But if you really want a completely blind guess...I'd say down because of consumer spending slowdowns.
AMD:
A long time ago, I was a complete computer geek, I knew what chips were better and which ones were no better than silicon goo. AMD used to be the preferred chip of the PC-enthusiast. Now, Intel's Core 2 Quad remains unanswered by AMD. One of AMD's major suppliers AMAT, Applied Materials, had weak sales. All signs point toward a bad earnings report.
Verdict: AMD needs to get its act together. Or Intel may have another anti-trust suit to deal with.
Entire Financial Sector:
Bad. Very Bad. Expect dividends to be cut. CEOs avoiding discussing how they haven't bought back any stock even though they said they would. We may have a gem or two, but I'm willing to bet that with IndyMac fresh on everyone's minds, people will be out for blood. ]
Pharmaceuticals:
Up. Most major financial institutions are buying pharma. Even mildly positive results will cause momentum player to come in and cause their prices to go further up. Get on the momentum bandwagon! Who cares about FDA probes and excessive debt? Everyone's sick of losing money calling a bottom on the financials! Its time to inflate some prices!
Ooof...talk about putting myself out there. Its going to be a busy week. Don't forget to listen to Bernake's speech to Congress this week. Oh, his recommendations on what the Federal Reserve wants to be done about Freddie Mac and Fannie Mae - the two federally back mortgage insurers (well...supposedly) are going to be critical in evaluating the direction of the market for the next few months.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Full Disclosure: Intigril Capital Management is long Microsoft at time of publication of "One of the four most wonderful times of the year!" article
The air is crisp (with fear), the green is around us (perhaps leaving our bank accounts), and blue skies (or blue faces) are never ending.
Yes, earnings season is here. One of the four periods of the year, spanning about 3 weeks, where every company's CEO has to get on a conference call and fess up to the shareholders the fact he/she has spent way too much time on the golf course. This week we are going to find out about Google, Ebay, Microsoft, AMD, Apple, IBM, Citigroup, Coca-Cola, JPMorgan, US Bancorp, Wells Fargo, State Street, and much more.
Generally, you see sell offs before an earnings week because day traders pull all their investments out to avoid any major surprises.
What did you think - the Dow hitting 11,000 on Friday was for no reason?
The value investors (such as Intigril Capital Management) stay in because earnings reports validate our predictions (and our total assets). I can't wait to listen to the conference calls of the above mentioned companies and find out what .0005% shortfall in some obscure earnings metric causes a company's stock to plummet by 33%.
So below are a few of my predictions for select companies/sectors:
Microsoft:
I expect results that would have normally sent the stock going up. However, with the YHOO-MSFT merger any good news is probably going to be obscured by uncertainly surrounding the Icahn proxy fight.
Verdict: It's definitely not going down, but it may not go up, even with stellar results.
Google:
It's going to move. Hard and fast. Right now, Google has become a speculative short target because Google has never had to face a recession. However, their results last quarter blew the doors off and everyone shorting Google lost a lot of money. However, economic conditions have deteriorated significantly. Google may not be invincible. I wouldn't be surprised if the stock moved down, hard and fast. But with the best nerds and a determined management, its likely to go up.
Verdict: Big move. Likely up 8-13% , but a fall is still a possibility, and if it does happen, were talking about 15-20%
Coca-Cola
A energy drink company called Hansen Natural reported weak sales at convenience stores. I expect Coca-Cola to be hit by this trend as well. Word on the street is that they are making heavy discounts on their soda at gas stations to spur impulse buys. So either the market is going to get mad at the margins if this discounting rumor is true and if its not true, its going to get massacred because of declining revenue.
Verdict: Neutral to Negative. Some metric is going to upset someone. But they might be already be expecting it. Just don't expect this stock to react more than a percent or two in the positive.
Ebay:
I have yet to figure out what global market forces cause this company's stock to do well. You would think that maybe they would get increased revenues from liquidation companies during economic downturns, but this is likely counteracted by decreased revenue from long-standing businesses because of consumer spending slowdowns.
Verdict: No clue. But if you really want a completely blind guess...I'd say down because of consumer spending slowdowns.
AMD:
A long time ago, I was a complete computer geek, I knew what chips were better and which ones were no better than silicon goo. AMD used to be the preferred chip of the PC-enthusiast. Now, Intel's Core 2 Quad remains unanswered by AMD. One of AMD's major suppliers AMAT, Applied Materials, had weak sales. All signs point toward a bad earnings report.
Verdict: AMD needs to get its act together. Or Intel may have another anti-trust suit to deal with.
Entire Financial Sector:
Bad. Very Bad. Expect dividends to be cut. CEOs avoiding discussing how they haven't bought back any stock even though they said they would. We may have a gem or two, but I'm willing to bet that with IndyMac fresh on everyone's minds, people will be out for blood. ]
Pharmaceuticals:
Up. Most major financial institutions are buying pharma. Even mildly positive results will cause momentum player to come in and cause their prices to go further up. Get on the momentum bandwagon! Who cares about FDA probes and excessive debt? Everyone's sick of losing money calling a bottom on the financials! Its time to inflate some prices!
Ooof...talk about putting myself out there. Its going to be a busy week. Don't forget to listen to Bernake's speech to Congress this week. Oh, his recommendations on what the Federal Reserve wants to be done about Freddie Mac and Fannie Mae - the two federally back mortgage insurers (well...supposedly) are going to be critical in evaluating the direction of the market for the next few months.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Full Disclosure: Intigril Capital Management is long Microsoft at time of publication of "One of the four most wonderful times of the year!" article
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