Google (GOOG) sold off to the tune of 8% following its tepid first-quarter earnings report which fell short by a few cents on the bottom line. Was two cents worth an 8% haircut on a stock that was already underperforming? There is no definite answer to that question, but I think that the stock is a great value here and I would be a buyer.
Worried Investors
Analysts and investors are worried about the escalating operating expenses and increasing hiring, which is hurting the company’s margins. I think these fears are short-sighted because these expenditures will pay off big over the next several years. The company is investing heavily in research and development and hiring the best talent. What is wrong with that?
Long-term investors have the luxury of not being as short- sighted as Wall Street is. While traders are scrutinizing quarterly results, patient investors can take solace in the fact that the company is building a global powerhouse that will be competitive in a variety of areas for years to come. What does it matter if operating expenses are temporarily high now as a result of heavy investment?
Core Search
Google sites revenues soared 32.8% over last year, which was a strong acceleration over the previous growth rate. This is extremely bullish and was overlooked by investors. Management said that Google.com showed strength across all geographies. The fact that revenue growth in this segment is actually accelerating is amazing given the size of the company.
I believe the market is underpricing the stock. It is currently trading at only 13.2x next year’s earnings estimates. This is a laughable multiple for a company in Google’s position that is still growing strongly. I am not sure how one can justify it trading at a market multiple. This is a company that is still growing in the 15-20% range and has awesome growth opportunities ahead of it. Just because the market is too short-sighted to realize this, it doesn’t mean you have to be. This stock is a strong buy right now.
Google: Getting Mouthwatering At These Levels is an article from: 
