Parsing the Street’s Reaction to Google

By Justin Rohrlich  JAN 22, 2010 1:40 PM

Bulls and bears weigh in on the search giant.


Google (GOOG) shares slid by more than 3% to $563.94 this morning after its earnings release yesterday. Reactions are mixed as to where the company’s stock is headed.

Will Google pull out of China? Will Google’s Nexus One mobile phone adapt to combat the negative press it’s been hit with since its recent launch? And what about the news that Apple (AAPL) is considering replacing Google as the default search engine on the iPhone with Microsoft’s (MSFT) Bing?

According to BusinessWeek, an Apple shift to Bing would “cut Google off from some of the search data that's the lifeblood of its business. Google has grabbed 65% of the traditional PC-based search market in large part because it has had far more information about what people are looking for and could use that to refine its search algorithms. If it can't get the same kind of data as people shift their computing to the iPhone and other mobile devices, Google risks losing its edge in search.”

"This would be a significant blow," said analyst Jonathan Yarmis of the research firm Ovum. "Google would be cut off from the most important platform on the mobile Web."

We all know the markets hate uncertainty. But Standard & Poor’s equity analyst Scott Kessler told the Wall Street Journal that Google, specifically, “is a stock that tends to not fare as well when there is material uncertainty that is not fully addressed.”

Here’s what the word on the Street is:

It should be an interesting 2010 for Google and investors as we watch how the company’s foray into hardware pans out, the financial ramifications of Chinese government policy, and the intensifying rivalry with Apple.

What does it all mean? It may simply be one man’s opinion, but, to borrow a line from Collins Stewart, Google looks like this year’s “show-me story”.

No positions in stocks mentioned.

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