This research paper analyzes Google Inc’s rating with regards to how analysts view the company’s stock and how it compares with other companies in the industry. Google is known to be a leader in search engine optimization and its headquarters is in Mountain View California, USA (Yahoo Inc, 2011). To achieve the best outcome for this study, this paper evaluates the number of analysts who have rated the company, the percentage of analysts who have rated the company’s stock as a ‘strong buy’, how the company rated during the week (and how the ratings compared to the previous week), how analysts rate this company among other companies in the industry and what amount the company posed as ‘surprise earnings’ in the last quarter (April to June 2011). These issues will be analyzed systematically.
Number of Analysts who have rated the company
Seven analysts have rated Google Inc. These analysts are Hilliard Lyons, Collins Stewart, ISI Group, Canaccord Genuity, WedbushCaris & Company, and MKM Partners (Yahoo Inc, 2011, p. 2)
Percentage of analysts who have rated the company as a strong buy
From the seven analysts who rated the company, five rated the company’s stock as a ‘strong buy’. These are Hilliard Lyons, Collins Stewart, Canaccord Genuity, Caris & Company, and Wedbush (Yahoo Inc, 2011, p. 1). The five analysts amount to a percentage of 71%. This figure is obtained through the following calculation: 5/7(100).
How the company rated during the week
During the last week ending 19th August 2011, the company’s stock was rated 1.8. In this analysis, it should be understood that 1.0 is a ‘strong buy’ and 5.0 is a ‘sell’ (Yahoo Inc, 2011, p. 1).
How the ratings compared to the previous week
Compared to the previous week, Google Inc’s company ratings never changed. In the previous week (preceding the week ending 19th August 2011), the company was still rated 1.8 (Yahoo Inc, 2011, p. 1). This means there was a 0% change in the company’s ratings
How analysts rate this company among all other companies in the industry
Google is rated among the top leader in the internet software and services industry. Analysts note that the strongest competitor for Google is Apple Inc., whose stocks have also been termed as a ‘buy’ by many analysts including Canaccord Genuity Corporation (Yahoo Inc, 2011, p. 1).
However, some analysts such as Credit Suisse have asserted that Google’s stock should be maintained at ‘outperform’. However, Google’s ranking in the industry has been analyzed on many other platforms. For instance, in terms of market capitalization, Google is rated the first in the industry. In terms of the P/E ratio, Google is rated 29, out of 89 players in the industry. The company has also been rated on other parameters including the PEG ratio, revenue growth, EPS growth, Long term growth, and return on equity. Here, the company has ranked 22, 18, 13, 22, and ten respectively (Yahoo Inc, 2011, p. 1). These figures were rated out of 89 entrants
Amount posed as ‘surprise earnings’ in the last quarter
In the last quarter, Google has posted a strong surprise earning, emanating from its mobile technology investments which have started to pay off (CBC News, 2011, p. 2). This surprise earning has also been observed to emanate from effective search improvements and program executions, which have significantly increased the company’s stock price by up to 12% (CBC News, 2011, p. 2). This increase translates to about $60 for every share. This trend is affirmed by Kansas (cited in CBC News, 2011, p. 2) who states that:
“Better-than-expected results and successful Google+ launch should stem some of the short-term stock angst about the Internet giant’s investment-and-development strategy, Wells Fargo says. It notes investments are paying off sooner than thought and argues momentum in mobile, search improvements and product execution can push the stock higher” (p. 2).
The earnings surprise was significant for the last quarter because the figures surpassed analysts’ estimates about the company’s performance. The company made $2.5 billion in the last quarter, but it was estimated to generate revenue of only $1.84 billion (CBC News, 2011, p. 2). This increase amounted to a surge of 36% in revenue. This increase was also observed from April to June.
This paper identifies those analysts have consistently rated Google Inc’s stock as a ‘strong sell’. This observation is supported by the fact that 71% of the analysts quoted in this paper affirm that Google’s stock is a ‘strong sell’. Google is also fairly rated in the industry as a leader among its peers. In the last quarter, the company posted a surprise earning of $2.5 billion which amounted to a 36% surge in estimated earnings.
This increase shot the company’s stock price by 12%. From this understanding, we can affirm that Google’s stock is attractive because apart from the ‘strong buy’ rating maintained by company analysts, none of the seven analysts recommended that, shareholders should sell their stocks. This means that most analysts project that Google’s stock has a strong potential for growth, considering the increased growth of the internet service provision industry (Weygandt, Kimmel, and Kieso, 2008).
CBC News. (2011). Google Shares Soar On Earnings Surprise. Web.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting. Hoboken, NJ: John Wiley & Sons.
Yahoo Inc. (2011). Analyst Opinion. Web.