Ahead of Earnings, Google Is a Strong Buy

By ChartLabPro.com  OCT 18, 2012 9:20 AM

Downside risk, especially the EU's stance over privacy concerns, will likely be minimal.

 


MINYANVILLE ORIGINAL Google (NASDAQ:GOOG) will report earnings after the bell. We currently have the company rated as a Strong Buy based on our proprietary algorithm, and we went long the name on July 30 for a 20% gain. We reduced 100% of our position when the countertrend indicator reached an Overbought level at $767.  The name is no longer Overbought and reached a Neutral reading at $740. 

We're excited about Google because of its long-term growth prospects. Unlike some competitors, Google's search on mobile works well and is growing. What's the potential downside? One issue could be that market expectations are simply too high: Recall in July when Apple (NASDAQ:AAPL) reported a strong jump in earnings but, because it missed analysts' even higher targets, the stock fell. As of now, we don't see that happening with Google. Another downside factor to consider is how the EU's position over privacy issues plays out. 

Earlier this week, EU regulators objected to the changes Google made this year regarding the terms and conditions governing how it can use data about his hundreds of millions of customers across all its platforms -- Gmail, YouTube, search, etc. The European Commission, the EU's executive arm, in January proposed the creation of a single set of privacy rules throughout the 27-country bloc. If implemented, the reform would give regulators the power to fine companies up to 2% of their annual revenues. For Google, that would amount to a $760 million fine. Given the collective shrug consumers have given the issue on this side of the pond, our feeling is that Google is already so integrated into people's lives that this won't happen.

This morning Needham upgraded its price target on Google from $750 to $825.


Click to enlarge

For more from ChartLabPro.com, click here.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.