Google Overpriced, Earnings Forecast Looking Bleak

by Jason Wilk on April 13, 2009

google_logopicture-31

  • J.P. Morgan analyst Imran Khan put out a note this morning predicting that Google (GOOG) revenues will decline 2 percent from last year and will be down 13 percent from last quarter. Khan also revised his pro forma EPS estimates down 5.5 percent from $5.04 to $4.76. (Schonfeld)
  • The chart shown above has a lot to do with it.  Through February, comScore is showing declines in U.S. search activity and after Khan’s own research with search-marketing companies, has figured out that commercial searches are down for the quarter. Last earnings, I mentioned that Google would beat projected earnings (and was right) considering they flipped the switch to monetize any possible products that weren’t already. Products like YouTube overlay ads (which has proven to be a failure and YouTube now projected to lose $471M this year), allowing alchohol companies to advertise, parked domain monetization, etc. all took place last quarter. This time around, Google didnt’t have such a platter to choose from to help boost revenues, so they got out the chopping block. Khan said:

We believe Google has taken a very conservative stance to employee count, perks, and business investments. Cuts include reducing usage of ~6,000 contract workers and ~300 full-time employees (our est’s), cutting some free food cafes, the hours they run, and the people to whom the perk is extended, and shutting down or discontinuing further development of some businesses.

  • This may save Google as much as $450M in 2009, but will it be enough to offset corporate ad spends, projected to decline 20% this year? No, and if I were an investor, I would predict the stock to start heading south again. For no significant reason, GOOG has climbed from $290 on March 9 to today’s closing price of $378.


Must read related GOOG stories:

Update: YouTube On Track To Lose $470M This Year. Ouch

How Google’s Earnings Will Hold Up This Thursday

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Tagged as: 2009, earnings, Google, Q2, search down

  • I have to call bullshit on this one. February has 10% less days than January. While Jan is a slower month than Feb generally a decline of -3% is about right.

    The real problem with the previous quarter is that CPM and CPC rates absolutely collapsed for many websites and thus likely for the big boys as well. Declines of around 50% were pretty common.
  • Jason Wilk
    Hence Google trying to monetize the shit out of any product left on the table not displaying ads last quarter. Now take last quarter, keep the same sluggish CPM/CPC rates and you've got yourself a simple equation there James. ; )
  • The final quarter of last year was significantly better for my sites than the first quarter of this year and thus things really only went downhill post xmas. Though the last week of March was quite good, an advertising crunch perhaps as everybody scrambled to spend their marketing budgets?

    The two could even be linked, as Google monetises more of its properties there is less high paying ads left for Adsense publishers. Still, all bad for Google.
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