Posts Tagged ‘GOOG’

Mighty Apple (AAPL) generates billion dollar business in a few months…

By: ispeculatornew | Date posted: 05.04.2010 (3:32 am)

Looking at Apple, generating a new billion dollar business can almost look easy. We have barely started the month of May and Apple’s latest product, which was announced in late January, is already on pace to generate $1 billion in sales in this quarter. Simply amazing. Apple confirmed yesterday that it had just sold 1 million Ipad’s, far more than expected and now on pace to become a bigger business than the Ipod or the Iphone if that is even possible. The beauty of the product is that Apple has high margins on Ipad sales by all estimates, and has spent little money on marketing the product. It helps when media around the world is putting Steve Jobs and the Ipad on the cover of every newspaper and magazine. If we estimate an average of 600-650$ per sale for each Ipad (not including money made on related products, applications, books, etc), we can see that the Ipad already has 2/3 of the billion dollar in revenues in a matter of weeks.

Apple’s stock soars…

Of course, no one will be surprised to see the impressive growth of Apple’s stock in recent weeks. The Ipad has certainly been a major success and those critics who said that the Ipad was nothing more than a big Iphone are probably very sorry if they went short on Apple’s stock. Interesting stat about Apple. I read somewhere last week that someone that would have bought Apple stock for 400$ when the Ipod was first launched (instead of buying the iconic Ipod), would now have 15,000$ worth of Apple stock today. Is the same true of the Ipad?

Google’s stock is still depressed

Now compare all of this to Google. Google has been looking for a billion dollar business for almost a decade now. Search has been an incredible business but where will the growth come from now? We wrote a series of posts recently about Google’s next billion dollar business speculating that it might be as a financial data firm, providing financial research or even as a hedge fund. There are of course many different possibilities for the search giant but it’s safe to say that Google’s story has been much different in 2010 from Apple. No big success to date and a major problem with the Chinese government has certainly not helped the stock.

Having said that, I remain an optimist regarding Google and certainly a long time bull. But certainly at this point there’s no way to give Google the win over Apple.

Google (GOOG) at war with China

By: ispeculatornew | Date posted: 03.23.2010 (4:00 am)


There had been speculation about an outcome for several weeks now ever since Google (GOOG) had announced its intention to stop filtering search results. And finally it happened today, Google took drastic action basically taking action against the Chinese government. It took the step of redirecting all traffic from its Chinese website, Google.cn to its Hong Kong operations. There users can find an unfiltered search engine in their language. This is a direct attack towards the Chinese government and it did not take much time to generate reactions:

-“This move is totally wrong” – Xinhua (Chinese official news agency).

-“They stressed that foreign companies in China should abide by Chinese laws, and if Google is willing to abide by Chinese laws, we continue to welcome it operating and developing in China. If Google insists on dismantling the search service of its Chinese website, that is Google’s own affair. But it must follow Chinese law and international custom, and responsibly handle the aftermath.” – Chinese Official

Google carefully explained its decision on its own blog. This was not a mistake, not an error, it was a carefully planned move, that had been discussed with the US government with even Barack Obama being kept informed about the process that led to this outcome. What’s most clear is that this is a bold move. No matter how powerful Google might be (and it clearly is very much so), this is a bold move that could have massive implications for internet users in China as well as all companies involved in the Chinese market.

It is an interesting strategy because it is not illegal. The Chinese website owned by Google does not display unfiltered results, which would have made it easy for Beijing to kick out the internet giant. But let’s face it, the result is the same and the ball is now in China’s camp. It can now either block Google and deal with internal problems or a less likely scenario would be for China to now compromise or be more flexible with Google. How likely is that to happen? I’d say almost impossible. China considers itself a world power and surely hates to see Google challenge its power right now.

The winner?

Of course Baidu right now is looking like a very bright star. There is no doubt that the Chinese government will be on Baidu’s side in the near future. I had been hesitant to take a position on Baidu but I’m getting more comfortable with the idea and might become even more so when it becomes more clear how the Chinese government will react to Google’s recent challenge…

Is Google a one tricky pony?

By: ispeculatornew | Date posted: 03.10.2010 (5:00 am)

It is well known by readers of this blog that I am generally bullish on Google. It has so much power in this new era thanks to its dominant position on the internet. Think about it for a few minutes… over half of the world’s internet users start their internet journey with a search through Google’s search engine. That gives it immense power in many different ways.

1-Advertising space

No doubt, Google has the premium space for advertisers. Where else can a company like GM expose itself to users who are thinking of “Best SUV”, and only those users? As technology has became more powerful, companies are now able to setup websites and offers targeted exactly to users that type a given keyword. Of course, this makes the user happy as they have an offer that is generally customized towards what they were looking for. But it is even better for advertisers. For years, they had been spending for spots on TV, radio and the print media among other places. Of course, that did have benefits but they were not as easy to quantify. Nowadays, Google can help you spend your advertising dollars but also track that saw your ad, who clicked and what they did next on your website. Did they join your mailing list? Buy your product? The possibilities are endless and it makes Google a perfect target for advertising dollars. This has led to an explosion of ad growth and continued growth thanks to happy advertisers and satisfied users.

2-Knowledge

This has been overlooked but thanks to search engines queries, email, its mobile services and all of its other products, Google has been able to get incredible knowledge of what users are doing, where they are, what they are thinking about and even how they are feeling. The company is still learning how to best use this data (and likely will continue to do so for many years still) but even now it is able to launch products that it knows its users are looking for. Small things such as tracking your flight departure time are now easier to do on Google as the company noticed what users were looking for. My bet is that this will be a game changer in an increasing way over the next decade or so.

3-Boosting its own products

Searching for a smart phone on Google? Don’t be surprised if you end up going to a website promoting Nexus One. And you might end up on Google Finance if you look for stock quotes. Google would be quick to object that they are not manipulating search results to favour their own. No matter if you believe them or not, you could certainly argue that the guys promoting a Google service probably have more information about ranking better on the powerful search engine than most (or perhaps any other) competitors. Being the start of a journey on the web means you have at least some influence in sending users in a direction or another and that is an amazing advantage.

Revenue distribution

All of that being said. What inspired this article is actually a very impressive graph published on BusinessInsider which breaks down Google’s revenues by area. You can draw many things from the chart but probably the most stunning part about it is how Google remains a one trick pony in the fact that almost all of its revenues come from one area; the search result ads.

Does that worry me? No. I was surprised but after thinking about it, it’s not a shocker. In most of Google’s activities, it is still more focused on gaining market share than selling products or ads. Think of Google Earth, a product that is being used increasingly by both consumers and the media. Google continues to offer free use through all kinds of different Medias without even putting many advertisements on it. Will that change in the future? Probably. But I think it’s refreshing to see a company focused on its long term profits (probably more dependant on its number of users than anything else) than a company dedicated to boosting short term earnings at any price.

Threats (Bing, Social)

That being said, there are some threats to Google that should be considered when thinking about buying the stock. I would not consider threats to products such as Google Docs or other smaller products right now because those are not significant revenue contributors right now so any change no matter how big, would likely have little to no effect on Google’s stock. So in my opinion, threats are two fold:

-Search engine competition: Right now, the only threat even worth mentioning is Microsoft’s Bing. It is gaining some ground although it is spending a lot of cash to do so. It is unclear for now if Google should be worried and I will certainly monitor the situation. But currently, I would not consider it a threat as Google’s market share has not suffered and it is unlikely that even Microsoft can keep up this level of spending for long enough. Opponent? Yes. But not a threat for now.

Change in web use: This has been discussed and has certainly been a source of many worries at Google. There is a threat that users could start using the web in a different way using social web sites such as Facebook and Twitter as their start point instead of search engines such as Google. This has probably been the cause of recent mis-launches such as the one for Google Buzz or Google Wave. There continues to be chatter that Google wants to buy Twitter and that would certainly be of huge help to this threat. Will it happen? Difficult to say but I would hope to see Google get more involved very soon.

GOOG direction…Future growth?

But the main reason why I am still a believer in Google’s stock is that I think there will continue to be an important shift for advertisers from traditional media to the internet and a major portion of that money will go through Google’s hands no matter how it ends up being spent. Google remains the king of the web and has such an influence that it is difficult to imagine this changing anytime soon. Will it grow at 50% per year like some smaller competitors such as Baidu are doing? No, I don’t think so. But I do expect Google to show stronger growth in the next 2-3 years which warrants a much higher price for its stock.

And you are you bullish regarding Google?

New Stock Pick: Long Research in Motion(RIMM) / Short Yahoo(YHOO)

By: ispeculatornew | Date posted: 03.02.2010 (5:00 am)

To many, this might look like an odd pair to trade. And in many ways, I agree that it is. I was looking at my screen today trying to see the better opportunities and I thought the best opportunity right now is Research in Motion(RIMM). Yes, it continues to be under attach from both Apple(AAPL) and Google(GOOG) with Palm(PALM) slowly being taken out of the market. So the logical step was to pick RIMM against either AAPL or PALM. But I do already have a long position on AAPL (not that I would short Apple anyway… it would be almost as bad as shorting Baidu). Shorting Palm would be something to consider but at this point, Palm is down over 40% this year alone and everything seems to be going awfully wrong for the smartphone maker with its stock going dangerously approaching 5$.

Reaching that point is significant because many investors (institutional) do not have the authority to own low priced stocks (often defined as stocks below 5$) and so it could continue to fall for a while. So why not go short Palm? Because no matter what the company is, when its stock gets crushed so badly, at some point there will be a rebound. So I prefer going short a stock that should get crushed, instead of one that already did!

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PCLNPriceline Group Inc/The1245.932.8919.437.1829.134.68137.971.26133.428.9537.44
PPandora Media Inc24.54N/A47.84-7.74132.524.092.511.823.54N/AN/A

All regular readers here will not be surprised to see me go short Yahoo(YHOO). Last year, I did two trades on the stock (going short both times), and both ended up doing well. Among the stocks I follow, Yahoo seems to be the most overvalued right now. It trades at a P/E of 39 which is crazy for a company that is regressing right now instead of improving – its sales have actually been declining. It does have some assets worth mention but those are few and far between.

You can also take a look at the following chart published by TechCrunch about Yahoo users.. nothing more to say, case closed!

Anxious to invest in social web…

By: ispeculatornew | Date posted: 02.23.2010 (5:00 am)

I have written a few times about the anticipated IPO’s by Facebook, Twitter and LinkedIn and while all three continue to gain importance in the internet sphere, we do not have any more details about the timing of their public offerings. All networks are doing their best to show that they are the “popular choice”. Why? Because many believe that there will only be a few survivors in this new battle.

Social networks showing off????

Just take a look at the impressive graph posted by Twitter yesterday showing an exponential growth in activity. Facebook posted less than two weeks ago about reaching 100 million users and they do seem to be the two major leaders right now. But investing in both is next to impossible right now for regular investors so we are left with smaller players.

Other possibilities???

Yahoo owns Flickr, which in my opinion remains its most valuable property. But that being said, as regular readers of this blog would know, I am not a fan of Yahoo and would certainly not be the one to recommend using them as a social play. That leaves Google, which owns both Youtube and the recently launched Google Buzz.  Youtube is huge and will surely become an important center of profit in years to come but the problem is that at least for now, Google is hardly a play on social. Truth is that an insignificant portion of the revenues and profits come from Youtube and obviously from Google Buzz.

Stuck with nowhere to go then???

So that leaves us with no other option than patience, which is a shame as in many ways, Social and Search are now the two most important aspects and would certainly provide many investing opportunities.

Am I the only one anxious to get in the game??

Closing 2 trades and a look back on the two remaining live ones

By: ispeculatornew | Date posted: 02.18.2010 (5:00 am)

It is now time to close 2 trades, one that went badly and the other which went better than I could have hoped. I will start with the good one!

LONG NFLX/SHORT NILE

Blue Nile is a difficult stock to short because it is very volatile and trades at very high P/E’s compared to its peers (in my opinion). While I like the company and think it does have a very good future, its high ratios continue to shock me. I had gone short against Netflix, who announced very good earnings as well as a few more partnerships. This was the best example of a long/short trade that went for the best as Netflix gained 26.61% while Blue Nile lost 17.51% of its value for a total gain of 63.04%***

***As explained in the past, when you do long/short trades, you actually put up margin only, no capital and so returns are divided by .7 to account for the fact that 10,000$ portfolio would not have 10,000$ short and 10,000$ long but rather 14,000$ long and 14,000$ short.


LONG GOOG/SHORT BIDU

I knew that shorting Baidu was a risky proposition but simply believed it was also an overvalued stock at this point. I did turn out to be wrong. Google did remain steady (-2.19%) but Baidu gained (-15,82%) enough to make me a loser on this trade, a loss of 24.79%.


The other two trades that I currently have are both going fairly well so far:

LONG PCLN/SHORT EXPE +9,64%

LONG AAPL/SHORT AMZN +8,67%

So far this year, it gives me an average return per trade of 14.14%, well above expectations. Remember that I was quite happy last year with the 2,53% return I had given the short time the average trade lasts. I should have a new trade next Monday, hoping that they can continue to do well!