|Google Shakes Off Motorola Blues and Smashes Through $1,000, but Is Nasdaq Headed for Blow-Off Top?|
By Michael Comeau OCT 18, 2013 11:02 AM
Google's core business remains strong, while Motorola continues to flounder.
Google (NASDAQ:GOOG) truly is impressive.
It's got a financial anchor around its neck in the form of Motorola and fast-growing competition in Facebook (NASDAQ:FB) and Twitter, yet still managed to come out smelling like roses with yesterday's third-quarter earnings report.
Google reported a Q3 profit of $10.74 per share, easily surpassing consensus of $10.37. Revenues came in at $14.9 billion, edging out expectations of $14.8 billion.
This is an especially impressive performance in light of the rampant weakness in the Motorola unit, where revenue dropped a whopping 34% year-over-year, indicating the high-profile, made-in-the-USA Moto X Android smartphone is just not moving the needle. The Motorola unit also posted an operating loss of $248 million, indicating once again that the high-growth Android smartphone market remains challenging -- even for Google itself.
Nonetheless, while many Android phone makers are facing tougher times, the sheer extreme unit growth of the market is great for Google because it means more eyeballs on mobile ads, and thus big profits on the back end.
Additionally, it's very likely that a major part of the rationale for the Motorola deal was patent acquisition, as Google had already proven it was quite capable of producing hardware on its own.
Looking at the core Google business, revenues were up an impressive 19% year-over-year.
That pales in comparison to the huge growth seen on the social side of advertising. Twitter's third-quarter revenues were up 105%, while Facebook's are currently forecast to be up 51%.
Still, 19% growth is pretty spectacular for a company of Google's size, especially with this fresh competition from social on the rise. And it certainly was enough to propel Google shares to a new all-time high over $1,000 this morning, and drive the Nasdaq Composite Index (INDEXNASDAQ:.IXIC) to a new post-bubble record of 3901.43.
Speaking of which, is it possible that we are driving toward some kind of blow-off top in the Nasdaq?
As a whole, earnings season has been so-so at best for tech, given the mixed results from companies like IBM (NYSE:IBM), Intel (NASDAQ:INTC), and eBay (NASDAQ:EBAY), but we're seeing some real surges in growing tech names like Tesla (NASDAQ:TSLA), Netflix (NASDAQ:NFLX), and Sandisk (NASDAQ:SNDK).
So let's ask this question: What if Apple (NASDAQ:AAPL), the biggest component in the Nasdaq and a key psychological market leader, hits the cover off the ball with its forward guidance? And what if the Twitter IPO gets people even more revved up for tech?
Could the Nasdaq actually start making its way toward its all-time record of 5132.32, set way back on March 1, 2000?
Check out the long-term chart:
That's 32% away from here, so the odds seem small.
But then again, who would have thought that the S&P 500 Index (INDEXSP:.INX) would be up 22% year-to-date on some of the lousiest earnings seasons in history, or that it would celebrate a narrow aversion of a government shutdown with new all-time highs?
This will all end messy one day, but at least for today, tech is in the driver's seat.