Google's Pre-Earnings Chatter: Eight Points Where We Need Clarity
This story was written by Rafat Ali.
Analyst reports are abuzz with all kinds of speculation and data points about Google (NSDQ: GOOG) this week, ahead of its Q308 earnings announcement this Thursday. Among them, Barclays Capital's Doug Anmuth has come out with eight questions that he wants some more clarity on, from the company.He says these are the points investors need more clarity to come back to the shares in a bigger way. Things are catching up to the company, he thinks, and Google's growth trajectory is likely to be negatively impacted in the near-term by a combination of the broader macro slowdown, Google's already high market share and the law of large numbers, and the stronger dollar.
The eight points of clarity:
-- How Much Is Macro Impacting?: "We hope that Google again includes Chief Economist Hal Varian on its earnings call to provide more perspective on the macro situation as it relates to search, and specifically on how ROIs may be changing and how advertisers are adjusting their keyword bidding and total allocation of search dollars."
-- How Much Is Google's Natural Deceleration?: "Google is encountering slower company-specific growth as a result of already high market share and penetration, and the law of large numbers."
-- What's The Impact of FX Hedging and Is The Program Expanding?: "Hedging and lower interest income cost Google about $0.20 in PF EPS in 2Q08 and we think investors are looking for more clarity around the near-term benefits of the program and how much more expensive it could become."
-- Are There Material Monetization Levers Remaining?: "We understand that monetization improvements going forward are likely evolutionary and not revolutionary."
-- What's the Growth Profile for the U.K.?: "The UK is also an important market to watch because it has the highest penetration of online advertising among the major markets. Therefore, it could serve as a proxy or template for how other international markets could trend."
-- How Much Is Google Getting Costs Under Control?Can Margins Expand?: "We believe investors need to see tangible evidence that Google is pulling back on costs in the current environment. We believe this is happening more than ever before, we're just not sure how quickly and exactly to what magnitude."
-- When Will Display & YouTube Matter?: "We expect Google to become a more meaningful player in display, but it still needs to improve its inventory for AdSense for Content and figure out a way to show more O&O display within certain types of search results without hurting the user experience."
-- How Will Google Operate Under More Intense Regulatory Scrutiny?: "While we understand the strategic benefits for Google of an independent Yahoo! (NSDQ: YHOO), we are not sure the search deal is worth the more intense scrutiny that will accompany it."
By Rafat Ali