Monday, May 10, 2010

Google: Back From The Abyss


Google is up +5.78% for the week, down -0.77% for the month, down -15.86% for the year, and up +79.33% since the March 9, 2009 market bottom. GOOG set another YTD closing low on Friday, May 7 of 493.14 before rebounding on the EU Relief Rally on Monday to 521.65.  Goog's short-term operating performance has been very good. Of course, it's the long-term outlook, with the seeming loss of the Chinese market, that is of concern.  More comments on Google's overall situation is at the end of this post.

Google Daily Chart
Below is the GOOG daily chart for 2010.

Noteworthy Closing Prices on Daily Chart below:
Current 525.65.14 (Yellow horizontal line)
2010 YTD 1-4-10 High 626.75
YE 12-31-09 619.98
10 Month EMA 521.14

GOOG: Is The Bottom In? Again?

Intermediate-Term Trend
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, flipped to an intermediate-term bear market on Tuesday, May 4. That is, the 25d sma is now less than the 50d sma. The market pullback, Flash Crash, and general malaise of GOOG stock pulled the sma's down.

The current price is well below the January 4, 2010 YTD closing high and the 12-31-09 YE close, both now important recent, and far away, resistance and benchmark prices. Important recent resistance above is the trading range of late January through early March.  GOOG is just below.

Support, GOOG needs Support!
Solid support has been critical for GOOG during the China, Apple iAd, Q1 Earnings, & Eric Schmidt Beat Downs plus the general market pullback and Flash Crash.  However, the support has been lower and lower.  GOOG set another YTD closing low on Friday, May 7 of 493.14 before rebounding on the EU Relief Rally on Monday to 521.65.  GOOG has pulled back to early October 2009 prices.

Moving Averages
GOOG has broken down through, and remains below, the 25d, 50d, 100d, and 200d simple moving averages.  The 25d, 50d, and 100d sma's are descending.  The 25d is below the 50d and 100d sma's.

Uptrend Line
The uptrend line, a rate of price ascent, is from the November 24, 2008 closing low of 257.44 up through the May 7, 2010 closing low of 493.14, the new 2010 YTD closing low.  GOOG had broken down through a previous uptrend line, so this is a new, redrawn uptrend line.  GOOG has bounced up above the uptrend line on May 10.

Downtrend Line
The downtrend line, a rate of price descent, is from approximately the November 6, 2007 all-time closing high of 741.79 down through the January 4, 2010 high of 626.75, the peak YTD closing high so far. GOOG continues well below this downtrend line.

Relative Strength Index (RSI)
RSI 14 day = 35.21 is oversold; has bounced up from an amazing low of 13.72 on May 5
RSI 28 day = 39.22 is marginally oversold; has bounced up from 31.25.40 on May 7
The RSIs have plunged on the recent sell off but still indicate oversold conditions

MACD (12,26,9)
The MACD flipped to bearish on Friday, April 16 with a sell off and has remained so.

Long-Term Trend
The 10 month exponential moving average of 521.14 is the line in the sand, so to speak, for the long term signal of a bear market. GOOG both pinned through and closed below during last weeks material pullback.  GOOG is now just above this signal at the current close of 521.65.  GOOG is struggling with the long term bear signal.

GOOG is in an intermediate term bear market and struggling to remain in a long term bull market.  Are the Beat Downs over for GOOG? GOOG is surviving, but barely.  The critical 500.00 benchmark price was breached, but GOOG is now above.  The RSI 14 day and 28 day have plunged oversold conditions. The MACD signal is bearish.  The moving averages are bearish.  At this point, I think all that can be hoped for is GOOG stays above 500.00 and trades in the 500.00+ range.  Google is venturing into so many areas, yet significant revenue streams have not been developed from these efforts.  Until Google proves viable in an area other than online advertising, the stock is in limbo.

Google News

Quarterly Earnings
Google beat Q1 estimates but not expectations, but that's not all - CEO Eric Schmidt was not on the Q1 conference call.

The Curious Case of Google CEO Eric Schmidt
Schmidt was not on the Q1 Earnings conference call on Thursday, April 15. It was announced he would not be henceforth, period. With the recent accusations of Google being hacked from China, the China censorship issue, Apple CEO Steve Jobs introducing the direct competition of the iAd, and therefore the intense media, analysts', and investors' scrutiny of Google, this was a PR disaster at a minimum. At most, and worst, this is indicative of a problem between CEO Eric Schmidt and Google. Regardless, this absence of Schmidt spooked the market at a critical time when Schmidt should have been speaking to investors and analysts.

Google's internet license in China expired March 31 and Google has not attempted to renew it.  Google's mobile search is apparently working in China, from Hong Kong.  However, Google is effectively out of China and Baidu is now the market leader.

Long Term Outlook
Google beat Q1 estimates, but not analyst and investor expectations. Of course, it's the long-term outlook that is dampened by the Chinese issue and the world's largest internet market plus the Apple iAd. The question is how much investors will discount Google's PE. Google's PE TTM is now down to 23.64.  In comparison Baidu's TTM PE has reached 92.64.  It's all about expectations and the market has reduced its expectations of GOOG.

Apple iAd
First China, then Apple takes a shot at Google. Steve Jobs and Apple announced April 8 a new mobile advertising platform along with the iPhone OS 4. The last few weeks have belonged to Apple, lol. Obviously, the iAd platform is a direct threat to Google's advertising revenues, since Apple has made it clear it is going in the mobile advertising business. First GOOG has a China Beat Down, then an Apple Beat Down. AAPL stock is reviewed by Apple Digest here.

There's Android smartphones, Android smartphone OS, Google Apps Marketplace, Chrome browser, Chrome OS, Google Apps cloud computing, et. al.  What is making a net profit???  I think this question is weighing on GOOG stock and investor confidence and expectations.


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