Google Shares Break Record After Positive Q3 Results

Google stock has finally achieved what had been on the cards for months now, after it surpassed the magic $1,000 (£618) per share mark.

This development came less than 24 hours after the company on 17 October unveiled its generally positive earnings numbers for the third quarter of 2013.

Stock Surge

Last Friday, Google stock opened at $976.31 (£604) on NASDAQ, and went as high as $1,015.42 (£627.81) by early afternoon before lingering at the $1,011.01 (£625.08) per share mark by by 19:50, and closing at $1,011.41 (£625.08).

The rising stock performance accompanies the company’s pleasing third-quarter revenue and profit numbers, which beat analysts’ estimates, with revenue coming in at $14.89 billion (£9.2bn) and profits of $2.97 billion (£1.8bn), according to figures released 17 October by the company during an earnings call with financial analysts. The $14.89 billion revenue total was up 12 percent from the same quarter a year ago, while the $2.97 billion profit was up from the $2.18 billion (£1.3bn) profit that was posted in the third quarter of 2012, according to the company. The third quarter ended 30 September, 2013.

The rising stock price for Google, coming on the heels of the good third-quarter numbers, is not a fluke, according to analysts.

“Where I see them going is that they continue to get smart and they have a lead in the industry and they’re continuing to hire the best and brightest folks with search in mind,” said Daniel Maycock, an analyst with Slalom Consulting. “They know their core business so well that as long as success doesn’t go to their heads and they don’t become their own worst enemies, they will continue to do well.”

Right Moves

Google is doing several things right at once, he said, with its innovative Google Glass project soon heading to market, its ultra-fast Google Fiber Gigabit Internet and TV services beginning to get traction and its development and research with self-driving cars continuing to attract attention. “Any one of those three projects could be potentially explosive in terms of disrupting the industry today,” said Maycock. “Not only has Google showed their innovation despite all the pessimism about those three projects, but they are running their [search and advertising] business pretty well on top of that.”

What’s yet to be seen, he said, is whether Google’s success in search and advertising will translate into success in the worlds of vehicles and Google Glass. One thing is for sure, said Maycock, is that the company still has plenty of potential in new markets.

“I think that Google has another big business in the fold,” he said. “I don’t know which of those three it will be. Maybe one of those three are going to be it.”

One move that Google is making that bodes well for the future is that it is “getting a lot more critical about killing projects that don’t have the horsepower that’s needed to really keep Google successful, profitable and meeting expectations,” said Maycock. “I think at some point the only place to go is down, but they’re not there yet.”

Solid Performer

Dan Olds, an independent analyst with Gabriel Consulting Group, said that these are good times for Google, which “just performs, year in and year out.”

The latest stock prices topping $1,000 aren’t an aberration, said Olds. “Their numbers support this,” he said. “I don’t think that this flirtation with 1,000 is frothy over-exuberance by investors. I think the Google valuation isn’t really out of line, based on the history.”

The stock market is now rewarding that very solid performance, said Olds. “Google has been like that solid ‘A’ student in the classroom that maybe you don’t notice all that much until they suddenly get that full-ride scholarship to MIT.”

Financial Results

According to the latest financial figures, Google’s GAAP (generally accepted accounting principles) operating income in the third quarter of 2013 was $3.44 billion (£2.1bn), or 23 percent of revenue, compared with operating income of $2.74 billion (£1.7bn), or 21 percent of revenue, in the third quarter of 2012.

The company listed its advertising traffic acquisition costs (TAC) for the quarter at $2.97 billion (£1.8bn), or 24 percent of advertising revenue.

Revenue for Google’s Motorola Mobility unit sank to $1.18 billion (£729m), or 8 percent of consolidated revenue for the quarter, compared with $1.78 billion (£1.1bn), or 13 percent of consolidated revenue one year ago, according to Google.

Google presently has about 46,421 full-time employees, including 4,259 in its Motorola Mobility unit, according to the company. That compares with 44,777 full-time employees, including 4,599 at Motorola Mobility, on June 3.

In July, Google posted a second-quarter profit of $3.23 billion (£2bn), which fell short of analysts’ expectations. Total revenue for the period grew 19 percent from the same quarter in 2012 to $14.11 billion (£8.7bn).

In April, Google’s Pichette revealed at a technology conference that the company had stashed away $48 billion (£30bn) in cash to give it free rein and lots of financial options in the marketplace should tantalizing acquisition targets show up in its cross hairs.

In July 2012, when Google posted its first results since it acquired Motorola Mobility, the company posted second-quarter revenue of $12.2 billion (£7.5bn), a 35 percent year-over-year increase from 2011. Google’s $12.5 billion (£7.7bn) acquisition of Motorola was completed in May 2012.

In 2012, Google raked in revenue of $50.18 billion (£31bn) and $10.7 billion (£6.6bn) in profit for the year, surpassing the $50 billion (£31bn) annual revenue plateau for the first time in the company’s history. Google had earned $38 billion (£23.5bn) in revenue and profits of $9.7 billion (£6bn) in 2011.

In October 2012, Google suffered an embarrassing early release of its third-quarter Form 8-K report to the US Securities and Exchange Commission’s Website, which meant the financial data was accidentally available four hours before the stock market was set to close. That accidental report release triggered an early sell-off in Google shares, with stock prices dropping by about 9 percent before the sale of shares were eventually halted.

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Originally published on eWeek.