Nasdaq on the Move: Spotlight on Google

Nasdaq is gaining momentum, and Google is one of its most notable listings. Google is the global leader in online advertising and one of the most innovative large companies worldwide. Google’s current P/E ratio of 25.6 is reasonable, given the high expected annual earnings growth over the next five years (about 12% on average). Google’s share price is following a steady long-term upward trend, which we will review below. First, let’s look at our previous signal on GBP/USD.

Our Previous Signal on GBP/USD

Google {GOOG} at a glance

Here are Google’s Key Figures

GOOGLE PRICE		FUNDAMENTALS
Last Close:	$ 857.23	Shares Outstanding	331.77 Million
52 Week High:	$ 861.85	Market Value (capitalization)	$ 284.4 Billion
52 Week Low:	$ 556.52	Earnings Per Share (EPS)	$ 33.51
Beta	0.97	P/E Ratio:	25.58

Google Share Price Trend

Google’s main trend is clearly bullish and strong. Before this rally ends, its price could reach $900 or even $1,000. With a beta of 0.97, Google’s share price moves closely in line with the Nasdaq Index. This means we should expect price swings based on the overall market trend, which is also currently strong and bullish.

Chart: Google’s Closing Prices (2004–2013) and TCI Long

TCI Analysis

With TCI currently at +11%, Google’s share price does not appear overbought. Looking at past price peaks, TCI has often risen above +20% and sometimes over +30%. This suggests Google’s price can still continue its current upward trend.

Chart: TCI Indicator on Google

Using our TCI technical analysis model, we have identified key dates for short traders. These dates point to potential short-term price peaks:

• +3 trading days – May 10, 2013
• +9 trading days – May 20, 2013
• +17 trading days – May 30, 2013

Google’s TCI Data Table

Google Basic Strategic Analysis

Web Advertising Domination

Google was founded as a private company in 1998. Since then, it has grown rapidly and become the global leader in web advertising. Today, Google operates over 1 million web servers in its data centers. It currently runs 8 data centers (in the US, Belgium, and Finland) and plans to add 3 more in Asia (Taiwan, Singapore, and Hong Kong).

Google’s Plans

Google is working on many projects, including Google Glass and the next generation of the Nexus Tablet. Its mobile operating system, Android, has been a major success. Not all projects have succeeded, though. For example, Google Books faced copyright issues that led to lawsuits, which may moderately affect Google’s future cash flow.

Google’s Greatest Threats

Google’s biggest current threat is Samsung. This Asian giant dominates the Android smartphone market, and Google fears it could launch its own mobile operating system to compete with Android. Competition in other areas, like web advertising, is also intense, but the rapid growth of the online market helps reduce the impact of rivals. Google remains the leader in global web advertising because its search engine is far ahead of competitors. Google Search is the best internet search tool in the world and keeps improving, which secures the future value of Google’s advertising income.

In the table below, you can compare Google’s key figures with other web giants.

Table: Compare Google with Other Web Giants

COMPARE	Google	Apple	Microsoft	Facebook	Baidu (China)	LinkedIn
Market Value (Billions USD)	284	431	278	65	24	16
Current P/E	25.58	10.95	17.08	(-)	18.45	516.00
Forward P/E	22.26	11.52	12.27	73 .00	17.39	632.00
Beta	0.97	1.18	0.74	0.63	1.26	1.79

Source: Nasdaq.com

In terms of earnings per share (EPS) and P/E ratio, Microsoft and Apple are the most affordable in the comparison above. Companies like LinkedIn and Facebook have high P/E ratios because the market expects them to grow quickly and possibly become targets for future mergers and acquisitions. Google’s P/E ratio of 25.6 is reasonable, given the strong EPS growth expected over the next five years.

Google’s Annual Balance Sheet

 

■ Giorgos Protonotarios,

for TradingCenter (7th-8th of May 2013)