Google misses analysts’ expectations, hits all-time high: Where’s the Apple-esque reaction?

“One of the greatest mysteries in our market has continued for another quarter. A few weeks ago, I called Google (GOOG) the most overrated stock in the market. Again, that is overrated, not overvalued, as valuation is a different discussion,” Bill Maurer writes for Seeking Alpha. “Google’s stock has continued to soar higher, despite results that are not up to par. The company continues to be a mystery through complex results, and now a stock split that might make this name a complete mess.”

“Well, the magic show continued last week. Google missed its earnings per share estimate by a decent clip, yet the stock hit a new all-time high,” Maurer writes. “Google also admitted a mistake in regards to the Motorola Mobility deal, and the stock rose on that news before earnings as well.”

“On the top line, the company reported Q4 GAAP revenues of $16.86 billion. That number beat analyst estimates for $16.75 billion. Google’s paid click growth grew by 31% year over year, but the cost per click actually fell by 11% year over year. Motorola Mobility had revenues of $1.24 billion, down 18% year over year, and an operating loss of $384 million,” Maurer writes. “On the bottom line, Google came in with non-GAAP EPS of $12.01. Analysts were looking for $12.26, so this was a clear miss, and earnings growth trailed revenue growth. GAAP EPS were just $9.90, as non-GAAP earnings continue to be 20% or so higher. Yet, Google’s stock soared to new all-time highs on the news. Might I remind you that Apple (AAPL) announced a record quarter for revenues, beat on the top and bottom line, and was crushed. Apple was hit because it missed on iPhone sales and provided weak forward looking guidance. Google doesn’t provide guidance, but is rewarded for its lack of transparency.”

Read more in the full article here.

Related article:
Apple posts record quarterly revenue, record iPhone and iPad unit sales; shares plummet – January 27, 2014

44 Comments

    1. This would not help. The issue is that Google’s profits grow, Apple’s are flat for the third year already.

      Unless Apple will enter new big categories (watches do not count because even the best watches would not be anywhere big business as iPhone, iPad or Macintosh), profits will not grow.

      1. Google’s non-GAAP profits grow. It’s per-click revenue is shrinking. The corresponds to Apple’s margins. What would happen to Apple if its margins shrunk by 11% year over year? Say, if margins went from 40% to 35.6%?

        1. Apple’s margins did drop from 44% to 36-38%, and profit for 2013 versus 2012 has fallen. Apple’s sharer can not seriously grow unless there will be perspective of profit’s growth.

          1. Exactly. And did Google’s share price drop like a rock, as Apple’s did? And here’s a fact ignored by the media. Yes, Apple’s margins declined from last year, but they declined from a one year high, to almost exactly Apple’s historical average margin of 37% to 38%. In other words, the 40% was a one year aberration, and now we’re back to normal. But the stock price gets punished for it.

      2. It doesn’t matter that Google’s profits are growing — that observation should have already been factored into the price on results day. What matters is that said growth came in lower than expectations, yet the stock still took off.

        This just demonstrates yet again that Wall Street is irrational, and that Apple should under not circumstances try to change its business model to please them.

        ——RM

      3. What? 16% growth for a PE of 31? Google’s enterprise value is greater than Apple’s, and Google only made $3.4B when Apple made over $13B. But since we’re talking what the share price does, Apple’s profit/share wasn’t flat, it went up, since Apple has fewer shares now.

    2. I have always wondered why any company would want to provide projected guidance to Wall Street, unless you’re projections were intentionally so modest that you knew you could beat them without even showing up to the office.

      This (plus Amazon’s performance) just shows that facts and real business success don’t matter to Wall Street, so people need to stop trying to reconcile the two. All that matters to Wall Street is that they took the right side of their investment.

      Apple continues to get hammered because Wall Street big investors like Icahn benefit from their positions by stock stagnation/decline. The opposite is true for their positions in Google and Amazon.

      Remember, Wall Street is not reality. Wall Street is just real-life Monopoly played with companies instead of properties.

    3. Sentiment. Forward guidance. Growth rate. That is all that maters to analysts. But in the longer term, the fundamentals of a company – rising revenues, earnings, cash flow and cash flow growth, and the level of long-term debt, are the factors that should most heavily influence a stock’s true valuation.

      Apple is a victim of sentiment and perception. Like the venerable lava lamp, eventually what is deemed as no longer cool goes full circle, and becomes a highly desired item. Pundits seek every opportunity to diss Apple, and that seems to be wearing down the perception of the company. But over time, I think Apple will be vindicated.

      Sadly, analysts, pundits and larger investors are addicted to the next big thing, and assume that any company, Apple included, can invent a game-changing device on command. But reality does not work that way. Like movie studios and pharmaceutical companies, Apple stock is valued highly based on its next blockbuster. At the moment, the company’s stock is valued as though it won’t grow a penny for the next decade.

      Yes, Wall Street is an irrational market. And that is what creates buying opportunities for the patient investor. The prejudice and undervaluation of Apple is frustrating to all of us. But the greatest and most successful investors are optimists, and patient ones at that. Remember this previous sentence. If you drown out the noise and lies, eventually, your patience and insight will pay off.

      Impatient Wall Street analysts might own the expensive watches. But you have the time.

  1. Clearly Apple is a highly manipulated stock. There are no other explanations.

    Here’s a little bit of free advice that I finally taught myself and makes this sort of news at least a bit less aggravating: Just because you admire Apple and use its products does not mean you should necessarily own its stock.

    Do yourself a favor and separate the two. They are two different things and should be treated as mutually exclusive.

    I’m as big a Nebraska football fan as there is . . . season tickets, tailgate spot and never miss a game on television if I can’t be there in person. But I never, ever bet on Husker games. I just want them to win, and don’t care if I do.

    May sound sort of stupid, but it’s not a bad policy.

    1. That’s not stupid at all. AAPL is a horrible stock to try to make money on, and it’s not Apple’s fault. I don’t see that it makes sense to own Apple shares unless you’re planning on holding them for the long, long term, say, until you retire. You’re not going to make money buying and selling AAPL, because you’re not a member of the financial companies pulling the stock’s strings.

      ——RM

      1. I’m exactly in that position. I’m retired and hold a fair number of shares I bought about fifteen years ago. Apple’s dividends (which I never expected) easily pay my monthly living expenses. I’ve no reason to sell but I gripe because I feel the company should be able to increase shareholder value or at least give increased dividends relative to its cash wealth and cash flow. One or the other certainly seems doable.

    1. And yet those things are just parts on a lab bench, nowhere near filling a product pipeline. But the punditry still wants those jetpacks and believes only Google can deliver them, given enough time and reliably supported by a never-ending flow of ad revenue, something Wall Street understands.

      They know practical old Apple won’t ever make them because they’re a bet-the-farm outfit who are one failed product away from the bottom falling out, and so seek to minimise risk. To the punditry, Apple are no longer the whiz kids, Google still are.

  2. … and then there’s this strange that was rejected by external share holders.
    Hey, does anybody want to buy C shares of me? You give me your money, and in principle, you keep ownership of it. But I decide what I’ll do with it, and you’ll get no dividend or whatever in return. OK?
    Seriously, I’d sell Google’s C shares immediately. Or rather, I’d sell GOOG befor that “split”.

  3. The problem is people think Google, like Amazon, has no threat of competition. On the other hand they think Apple is always just about to be overtaken by Samsung, or Microsoft…..somebody…anybody. Folks cannot fathom that Apple is without peer and so they just wait for it to stumble. I do not know how Apple can change that. It is a modern myth. Damn.

    1. The thing is, Apple could easily challenge Google for search engine supremacy but for some reason chooses not to. How hard would it be for Apple to build a decent search engine highly integrated into iOS or OSX devices. It would have to hurt Google to some financial and growth degree especially with all of Apple’s devices in the U.S. Google would be missing a hell of a lot of paid clicks which Google is dependent upon. Apple should still allow Google search to be installed as an app, in all fairness. That’s the way Apple could change Google’s perceived invincibility.

      Apple doesn’t need to do anything about Amazon because Amazon isn’t hurting Apple’s bottom line like Android and partners is doing. Amazon’s Fire OS is at least a forked Android OS and uses its own app store which doesn’t contribute to Google in any way. Amazon certainly isn’t going to challenge Apple’s market cap, ever. This quarter showed me that Amazon isn’t as bullet-proof as I thought it was. I thought Warren Buffet would jump in and pump the stock back up within a week or so. Not happening yet.

      I just feel Apple is missing a golden opportunity to cripple Google’s claimed or perceived invincibility as a search company with no peers. How difficult would it be for Apple to build a powerful search infrastructure? They could certainly afford to buy the best servers available and not have to support memory-eating services like Youtube. I don’t know much about the algorithms used, though. But even if Apple acquired the resources of DuckDuckGo they’d have a pretty good chance. DDG works pretty well for me and it’s fast.

      1. It is not as easy as you seem to think. If Microsoft could not challenge Google with Bing, Apple would do no better. Actually, given how Apple manages to f**k up with a lot of online services, they probably would do much worse.

        If Apple announces that they are going into search, I will sell my stock that day.

  4. Market manipulation is awesome for those controlling the stock’s fluctuation. Taking advantage of panic sellers is classic, and brings strong profits much quicker than sitting on the stock. Just look at Bitcoin.

    I believe only Apple stock is subjected to this because of its strength and high faith of everyone in its performance, not the opposite.

  5. People get all caught up in the idea of “the market” as a single entity pricing stocks based upon comparable metrics… and this is true, in a sense. However, The reality is that Apple investors and Google investors aren’t necessarily the same buyers. A stock is worth what someone is willing to pay for it, and people who buy Google are looking at a different set of data than Apple investors. I have no idea what that is, and it doesn’t make sense to me, but that’s the long and short of it. Same goes for Amazon. They are experiencing irrational exuberance… I have to think at some point it will all fall apart for them. However, Google and Amazon play the game too: creating rumors about space-aged vaporware. Apple doesn’t play the game, and it hurts its shareholders.

    1. That’s an interesting take I’ve never considered. I guess I assumed hedge funds just jump from stock to stock without necessarily looking for any long-term trends. I certainly don’t quite see Google outperforming Apple financially in the future, at least based on those products like Google Glass and driverless vehicles. It’s not the products themselves it’s what kind of legislation it will take to get those products approved for widespread use. A driverless vehicle in Manhattan? Google, you gotta be kidding me. Just one fatal accident would be a nightmare trying to determine who’s to blame.

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