Google (NASDAQ: GOOGL) announced its fourth quarter fiscal 2014 earnings report on Thursday, January 29th, missing EPS and revenue estimates. In response, shares of the internet giant dropped 3% in trading on Thursday, but ultimately recovered up 5% on Friday.
Highlights from the report include adjusted earnings of $6.88 per share on a Non-GAAP basis, falling short of analysts’ estimates of $7.08 a share. The company posted $18.1 billion in revenue compared to $18.5 billion that analysts had expected. In addition, the internet giant posted $66 billion in revenue for the full year. Google’s traffic has continued to grow as paid clicks were up 11% from last quarter and 14% from last year.
Google’s CFO Patrick Pichette blamed “strong currency headwinds” with the strength of the US dollar for missing revenue estimates. However, the company has fallen short of earnings expectations for four consecutive quarters, so missing estimates this quarter did not come as a surprise. Prices of ads sold on its properties declined, which was another factor in missing estimates. Pichette also admitted that the company had issues securing enough inventory of the Nexus 6 tablet to keep up with demand. In addition, Google spent more than $300 million in operating expenses in its final quarter of 2014 and purchased more real estate.
Many had speculated that Google could end up with over $80 billion in cash and marketable securities by the end of 2015, thus beginning a new dividend plan for investors. In response to this Pichette stated, “Share price does matter. It matters to our board, it matters to all of us, we are all shareholders in the company.” With that said, no new dividend plan was announced.
Pivatol Research Group analyst Brian Wieser reiterated a Buy rating on Google with a price target of $610 on January 30thfollowing the announcement of the company’s fourth quarter earnings results. He noted, “Google reported 4Q14 results that were broadly in line (if slightly below) our expectations and those of consensus, with strong top-line growth but deteriorating operating margins, heavy ongoing capital expenditures, non-core business diversification, an absence of likely cash returns and regulatory risks. All of these factors are now much as they were for several years (and were among the factors contributing to our negative view on the stock when its valuation was much higher). However, we continue to expect that eventually an equilibrium around Google’s positive and negative attributes will result.”
Brian Wieser has rated Google 7 times since February of 2013, earning a 100% success rate recommending the company and a +1.4% average return per recommendation. Overall, Wieser has an 81% success rate recommending stocks and a +18.5% average return per recommendation.
Similarly on January 30th, Credit Suisse analyst Stephen Ju reiterated an Outperform rating on Google with a $700 price target. He noted, “Looking LT, our investment thesis and Outperform rating remain unchanged, as we believe Google is set to benefit from the pricing convergence between mobile and desktop on the back of products such as Enhanced Campaigns, App Indexing, and cross-device attribution tools.”
Stephen Ju has rated Google 13 times since January 2013, earning a +3.6% average return per recommendation. Overall, Ju has a 55% success rate recommending stocks and a +13.2% average return per recommendation.
On the other hand, not all analysts were as optimistic as Wedbush analyst Shyam Patil reiterated a Neutral rating on Google with a $530 price target on January 30th. He reasoned, “After adjusting for currency, Google reported a relatively in line 4Q. That said, the core metrics—CPCs and clicks—were a bit weaker than expected. We are maintaining our NEUTRAL and $530 price target, as our checks have been cautious on the outlook, given moderating PLA growth, the mix-shift to mobile, and increasing competitive pressure.”
Shyam Patil has rated Google 7 times since July 2013 with all Neutral ratings. Overall, he has a 62% success rate recommending stocks and a +4.8% average return per recommendation.