Et tu, Goldman?
One by one, the Wall Street analysts who follow Google have been taking down their estimates this week.
The message: for Google, Christmas has just been cancelled (that is to say, the normal seasonal bounce that Google gets at this time of year will no longer happen.)
In one sense this is not surprising – in fact, it looks like a delayed reaction to news that was already in the market.
eBay and Amazon already issued gloomy forecasts to the effect that the holiday season will be a wash-out. These are probably the two biggest advertisers on Google. If online shoppers aren’ t shopping, Google’s heavily performance-based system has to feel the pinch.
So Google stock falling below $300 for the first time in three years was on the cards (though it popped back late on Thursday after one of those hair-raising bear market bounces that Wall Street seems to specialise in these days.)
Is this a floor?
To be honest, I still feel bad about my sarcasm when the shares topped $700. I think, really, that it’s high time I made amends. So I’m prepared to break with journalistic caution and make a reckless prediction. Here goes:
Provided two recent trends remain intact, and provided the worst fears about the depth of the recession are unfounded, Google could be good value at this level (OK, so there are some big caveats in there, but what did you expect?)
One of the recent trends is Google’s habit of improving its monetisation each quarter (better click-through rates, higher cost-per-click). Can this continue? Who knows. The art and science of search monetisation are not easy to grasp – look at Yahoo’s efforts. But Google’s track record is impressive.
The other trend is the increase in search’s share of online advertising. At least in relative terms, Google just keeps getting stronger.
Provided it continues, all of this means that Google is increasingly well positioned for a market that, long-term, will continue to grow. It would take a rash person, though, to predict when the long term will resume – or how deep the recession will be in the meantime.
