Wall
Street consensus is that Google (NASDAQ:GOOG) is expected to announce revenue
of $8.38 billion on earnings per share of $10.46 for the fourth quarter.
Yet
some financial analysts are modeling for better results based on the company's
newer search enhancements and improvements to YouTube advertising.
Specifically,
Google's "Panda" algorithm change, Instant predictive search
technology and Places local search service could buoy the company's Q4 and
fiscal year 2011 results, Global Equities Research analyst Trip Chowdry wrote
in a research note Jan. 5.
Chowdry,
who had previously modeled Google to rake in $8.23 billion in sales excluding
traffic acquisition costs and $10.57 EPS, now expects Google's Q4 sales to be $8.45
billion on EPS of $10.49. For fiscal year 2011, he is calling for revenue of
$29.42 billion and EPS of $37.05, from $29.19 billion on EPS of $37.13.
How
did Chowdry arrive at his increases? Bullishness in the social media and search
industry.
After
speaking to some 60 search marketers, he concluded the Panda
algorithm and ranking change to tamp down content farms and low-quality
Websites is providing more relevant search results than ever. This in turn
is attracting more advertisers and higher click-through rates, leading to
increased search revenues.
Google's
search query share has certainly prospered, as the company closed out 2011 with
66 percent search market share, according to comScore.
Chowdry
attributed this growth largely to the Google
Instant Preview search software, which surfaces results and previews them
without requiring users to click through every time. Google has said this
acceleration prompts users to conduct more searches.
As
for YouTube, Chowdry said Google's new TrueView ad format is pushing YouTube
monetization in a way never seen before.
TrueView
plays a video ad for 5 seconds, then allows users to skip the rest of it, with
the advertiser making money if users watch the full ad. Marketers have said this
pricing model has been five times as effective as other video ad formats.
Chowdry
expects YouTube's display ad sales to rise between 7 percent to 19 percent for
the quarter. Overall, he's modeling Google's 2012 revenue excluding TAC of
$38.48 billion and EPS to $49.90, a year-over-year increase of 30.8 percent and
34.7 percent, respectively.
Piper
Jaffray analyst Gene Munster, meanwhile, is less sanguine about Google's
present future, for which he believes the company's results in Europe could be
a wild card. He also believes the company's stock could fade due to uncertainty
over Google's acquisition of Motorola Mobility (NYSE:MMI).
Google
agreed to pay $12.5 billion in cash and stock for the Android smartphone
and tablet maker, a move Google CEO Larry Page made to acquire patents to fend
off mounting litigation in the mobile sector.
Given
the heat Google is getting from federal regulators over its search practices,
there's no guarantee the Justice Department will approve the merger.
Munster
believes the acquisition, should it come to fruition, will denigrate Google's
operating margins for 2012, dropping them from 46 percent to the low 30 percent
range for the year.
Though
one of the top Android OEMs in the world, Motorola has struggled of late,
announcing both financial and smartphone shipment shortfalls in the last two
quarters.
Munster
said the latest shortfall preannouncement, issued last week, will make
investors wonder whether or not Google will digest Motorola's thousands of
patents and jettison the operating business.
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