As of this writing, Class A shares of Google were down 1.02% to $507.19 ahead of tonight’s earnings report
Google is scheduled to release its next earnings report tonight, and Wall Street sentiment is beginning to shift toward the negative going into that report. Several analysts have downgraded the search giant’s stock—something that doesn’t usually happen to Google. It seems as if the bears are starting to take over.
Multiple analysts downgrade Google
According to CNBC‘s Ari Levy, the percentage of analysts who had a Buy rating on Google declined from 84% to 79% this month compared to last month. This was the first monthly decrease in sentiment on Google stock since November 2013, indicates data from FactSet. Just in the last year, shares of Google have fallen 8.8%, compared to the S&P 500’s 12% gain.
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Atlantic Equities and Stifel were two of the firms that downgraded the search giant’s stock heading into tonight’s earnings report. Both are expecting to see continued deceleration in the growth of Google’s core search business.
Growth in Google’s core business still slowing
Analysts at Atlantic Equities expect a 12% rate of deceleration each year through 2016. In the last few years, the percentage has been in the high teens. They point out that more and more consumers are switching to mobile devices, which bring a lower cost per click and thus, less revenue for Google.
The search giant has been trying to improve its mobile search products and keep its market share, so investors apparently want to see signs of progress. Analyst James Cordwell of Atlantic Equities cut his price target for Google from $692 to $560 per share earlier this month and downgraded the stock to Neutral.
Stifel analyst Scott Devitt also downgraded Google stock to Hold, but he cited lower margins in the company’s higher-growth businesses, including the Google Play store and YouTube.
In spite of all the downgrades and the increase in bearishness on Google, analysts as a whole remain very positive on the search giant. One of the reasons there’s still a significant amount of bullishness on Google is because of the pullback in the company’s stock price.
Expectations for Google’s earnings report
Consensus estimates indicate that analysts are expecting to see a 17% growth rate in fourth quarter revenue, bringing it to $18.5 billion for the quarter. They’re expecting the search giant’s earnings per share to be $7.11, compared to last year’s $6.01 per share.
According to Levy, analyst estimates for Google have been falling lately. The strengthening of the U.S. dollar is to blame, as it’s hitting the results of numerous other U.S.-based companies that operate internationally. For example, Piper Jaffray analysts reduced their estimates for Google’s sales growth based on currency exchange headwinds.