Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) is scheduled to release its next earnings report on Thursday. Analysts at BGC are expecting to see a 23% growth rate for Google’s core business in the September quarter.
What to expect in Google’ earnings report
In a report dated Oct. 10, 2014, BGC analyst Colin Gillis said he’s expecting Google to report total revenue of $16.7 billion. That’s a 4.9% growth rate sequentially and a 21.7% growth rate year over year. For adjusted earnings per share, he expects $6.62. The analyst is ahead of consensus estimates for both metrics. Overall consensus suggests revenue of $16.6 billion and adjusted earnings of $6.55 per share.
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He estimates that Google Websites revenue will grow 23% year over year to $11.5 billion or 68.9% of total revenue. The analyst estimates $3.5 billion in Google Network Members’ Websites and $3.3 billion in traffic acquisition costs. He expects a 24% growth rate for Paid Clicks and a 4% decline in Cost per Click year over year.
Google’s cash position
The analyst noted that as of the end of June, Google had $61 billion in cash or $89.17 per share. The search giant’s long term debt was $3.2 billion, while cash flow from operations was $4.5 billion. He states that Google’s cash rose by $1.8 billion in the June quarter
He has slightly increased his estimates for the 2014 and 2015 fiscal years. He looks for $26.63 per share in 2014 and $31.59 per share in 2015. Gillis has maintained his Buy rating and $650 per share price target for Google.
Google to hit $1 trillion market cap
In addition to updating his estimates for Google’s September quarter, he also said that he thinks Google will be the first U.S.-listed company to see its market capitalization surpass $1 trillion. That suggests that the search giant’s shares will be worth about $1500. Assuming Bloomberg’s 2020 consensus earnings estimate of $71.14 per share is correct, that provides a price to earnings multiple of 21 times, which is just slightly lower than the current multiple of 22 times its 2014 earnings per share estimate. The company’s current market cap is $382 billion.
The analyst notes that there are many risks between now and 2020 but said that he’s explaining what Google’s long term growth prospects look like. He points out that Google takes cash flows from its performance marketing segment and pursues other markets like content, robotics, enterprise computing, automation and operating systems.
Google to go far in robotics
Gillis particularly likes Google’s robotics efforts, which are led by Android founder Andy Rubin. He points out that although the search giant’s long-term investments usually “have a 10 year horizon,” he thinks the company’s robotic efforts could pay off sooner because of how quickly Google has been acquiring companies in the space.
Another factor he says will contribute to Google’s $1 trillion market cap is click pricing, which he thinks could stop declining and reverse as early as next fall. He cites mobile monetization improvements and traction in location-based marketing. He thinks the next five years will be especially important for Google.