Note: New research is available for subscribers at the bottom of this article.
This research report is going to be a bit different. As you know, I chose Google as my stock pick in the 2nd Annual CNBC Stock Draft – after winning it last year with Google. This (as with most of my public moves) proved to be both contrarian and controversial. There were other companies to choose from (which I will share with my subscribers over the upcoming weeks), but do to my father passing away and the fact that I run a subscription service, I did not have the time parse a pick that wasn't the purview of my subscription service.
Alas, Google will do just fine and I believe it has a very strong future – as long as the stock as long as the market doesn’t come crashing back to reality!
As per Google’s CEO, they “had a really strong start to 2013, with Q1 revenue up 31% year-on-year to $14 billion.” This tends to overshadow the real strength in Google’s performance, and that is its very significant investment in future products and innovations. Again, as per the CEO, “Over the last two years, we worked hard to increase our velocity, improve our execution, and focus on the big bets that will make a difference in the world.”
If you remember Apple’s Siri, you remember a microcosm of the universe in which Apple and Google exist, complete with their strengths and weaknesses. Apple is a marketing behemoth, but their engineering lacking in relation to their data hungry adversary. Google is an engineering behemoth, although their marketing may be a tad understated for certain shareholder’s tastes – and particularly when compared to Apple. Siri essentially is a flop. As for Google Now, Google’s version of Siri (which predated Siri)…
“Take Google now, our goal is to get you the right information at just the right time. Launched nine months ago, Now provides boarding passes, delivery updates, and traffic conditions without you having to ask first. In this quarter, we added movie tickets nicely packaged with directions to the theatre. I am also excited about our Voice Search momentum. Looking for the nearest pharmacy, just ask Google for directions, and we’ll deliver them instantly, no typing needed. And you can now ask conversational questions like do I need a jacket this weekend. Voice commands are going to be increasingly important, it's just much less hassle to talk than type.”
The importance of Google’s voice command technology cannot be understated. These are examples that I just used for those unfamiliar with the tech.
As compared to the closest competitor, Apple's Siri...
These commands take even more precedent when viewed in context of Google's biggest launch of the year, Glass....
Google is in the final phases of launching a product, a product that is to personal productivity as the smart phone was to computing. The company is up about 10% since that video about a month and change ago...
From the latest quarterly valuation update for BoomBustBlog subscribers (click here to subscribe):
BoomBustBlog releases its updated valuation on Google Inc. The stock has registered a +47% return since our last valuation update in March 2012.
Google continues to play a dominant-leader role in the online advertisement and search market. Its market share in online advertisement has been consistently growing not only in the US, but also in the other geographies. Besides being a leader in the online advertisement market, the company has been continuously taking initiatives to broaden its product and service offering. The last year has seen a number of (now) well-known products.
The continuous endeavor to diversify product and services through sustained efforts in research & development forms an important component of our valuation. While we expect that the company will continue to grow its revenue off its leading space in the advertisement and search market, its ability to diversify its future revenue in different streams is a key to the current valuation. We therefore expect its revenue to grow along a more diversified route. This statement requires some explanation, for most still don’t seem to understand the Google business model. Google monetizes the vast majority of its initiatives through ad revenue. This causes many to label Google’s various ventures as a failure, due to being misled by cost shifting. Google cost shifts through a myriad of products, disrupting entire industries, then monetizes the results through “Ad Revenue”. Thus, looking for direct revenue streams from Android is fruitless in comparison to searching for strength in ad revenue bolstered by Android.
Google has almost consistently outgrown the adoption rate of web advertising. What does this mean? Well, it means that although Web advertising is getting bigger and more popular as a slice of the total advertising pie, Google is getting even bigger and more dominant in the space – not less. Google is beating competition back even as the market grows!
- Google Q1 2013 Valuation Note - Retail
- Google Q1 2013 Valuation Note - Professional & Instititional