Wednesday, March 08, 2006

$10 billion GOOG revenues not good enough

This has happened before.

Google communication problems raising concerns about management and impacts stock price: that is the story of why the IPO was a screaming buy. Because in the end, this is a company that is putting up amazing numbers and still relatively new at communicating but in a way that I believe is a fundamentally honest effort.

After all, why publish the powerpoint so rapidly except in an attempt to communicate better? They sure won't make that mistake again. And the analyst day was a dramatic improvement. I predict next year's will add the humor that was lacking this time around and it will be close to perfect.

The good news amidst all of these self-inflicted wounds is that they can improve their communications and it will all be water under the bridge.

The notes on the revenues say precisely:

" . . . projected to grow from $6bn this year to $9.5bn next year based purely on trends in traffic and monetization growth"


"Execute well on our core ads projects to help us exceed the $9.5bn target . . ."

So the company had an old target of $9.5 bn which may even have been a number based on analyst estimates for 2006. And analyst Jordan Rohan thinks this should be $10 bn including AOL saying "If the timing of the leaked information is correct, it would exclude about $450 million in gross revenues from AOL."

Also, if the Adsense margin squeeze also dated from that time, then the AOL deal certainly mitigates Adsense margin risk.

Based on these numbers, Goldman lowers it's target for the stock by 2% (!) from $500 to $490. That's like the daily fluctuation! Come on, if you think monetization enhancement has really run it's course per George Reyes pre-Analyst day, you can be a little more daring than that.

Hey, this is a volatile stock and anything can happen, but if we're on track for a decent Q1 what do you bet that all will be forgiven and this will look like another buying opportunity?


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