Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Google Inc (GOOG), Yahoo! Inc. (YHOO): Is This Internet Giant a Buy on the Pullback?

Page 1 of 2

Search giant Google Inc (NASDAQ:GOOG) has been scoring a number of upgrades on the Street, and rightly so. The company is extremely well-positioned to capitalize on numerous secular trends primarily related to being the most dominant force in the Internet and Mobile OS. The company’s share price saw a pull-back recently from the all-time high of ~$920, and this might be a good time to commit more capital to Google Inc (NASDAQ:GOOG)’s stock.

Google Inc (GOOG)

Strong numbers across the board; Motorola still a laggard

The most important number for Google Inc (NASDAQ:GOOG), total paid clicks, has shown no signs of slowing down and was up 20% Y/Y in the most recent quarter. The average cost-per-click (CPC) saw a 4% Y/Y decline during the period. Google Inc (NASDAQ:GOOG)’s top-line grew at a healthy pace of 31% Y/Y to $13.97 billion. The company’s operating income for 1Q13 was $3.48 billion, which points to an operating margin of 25% for the consolidated business, which marks a contraction from 1Q12 when it stood at 32%.

The contraction was largely due to the weight of an operating loss of $271 million arising from the Motorola Mobile division. Google Inc (NASDAQ:GOOG)’s net income for Q1 FY13 was $3.35 billion, which includes earnings from the soon-to-be separated Motorola Home business. Google Inc (NASDAQ:GOOG)’s operating cash flow stood at $3.63 billion, and the company’s free cash flow stood at $2.43 billion after paying for capital expenditures worth ~$1.2 billion. The company continues to invest in businesses that have been widely adopted by consumers, especially Android, YouTube, and to a smaller extent, Chrome.

Core businesses are rock solid

Google’s core business of Search and Display advertising continues to perform very well as more Internet-connected devices hit the market. Revenue from Google sites saw an 18% Y/Y increase to $8.64 billion, and the company’s network revenue saw a growth of 12% Y/Y and stood at $3.26 billion. The company’s revenue from the Motorola Mobile division stood at $1.02 billion.

The company’s search market share remains rather steady. Google held search market share of ~66.5% in U.S., followed by Microsoft Corporation (NASDAQ:MSFT) with 17.3% and the struggling Yahoo! Inc. (NASDAQ:YHOO) with only 12%, according to data from comScore. Google continues to gain revenue at the expense of comparatively weaker firms like Yahoo! Inc. (NASDAQ:YHOO). In Q1 2013, Yahoo! Inc. (NASDAQ:YHOO) reported a 7% Y/Y decline in revenue growth, and it hasn’t seen revenue growth for a while now.

As a result, Yahoo! Inc. (NASDAQ:YHOO) went shopping and bought growing social platform Tumblr for $1.1 billion. Tumblr has more than 300 million visitors each month, and a strong presence in mobile as well, both of which are very attractive traits for an Internet business. Tumblr might have been a good buy for even Google as well, as the search giant’s cash hoard ballooned to over $50 billion.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!