Saturday, April 9, 2011

Google Languishes Below 50 & 100 Day Averages (Chart) *Down -2.66% for 2011* GOOG


NASDAQ is rebalancing the NASDAQ 100 Index effective May 2,  2011
Among the changes, Google will increase from 4.18% to 5.77%

Google Overview

Google Inc. GOOG closed at $578.16 on Friday, April 8, 2011. Google was down -2.30% for the week, is down -1.47% for April, was down -4.34% for March, is down -2.66% for 2011, and is up +98.76% since the March 9, 2009 market cyclical low. GOOG is down -9.61% from the 2011 and multi year closing high of $639.63 on January 18, 2011. That was the highest close since $653.82 on January 14, 2008.

S&P 500 By comparison, the overall market, the S&P 500, at 13258.17was down -0.32% for the week, is up +0.18% for April, was down -0.10% for March, and is up +5.61% for 2011. SPX is up +96.32% since the March 9, 2009 market cyclical low. SPX closed at a multi-year closing high of 1343.01 on Friday, February 18, 2011, the highest close since the June 17, 2008 close of 1350.93. GOOG is outperforming the overall market long-term since the March 9, 2009 market bottom, underperformed the market in 2010, and continues underperforming the market in 2011. A review of the S&P 500 is here [S&P 500 Dips -4.24 for Week (Chart) *Continues above 20 & 50 day averages*].

Google Fundamentals Google will report calendar Q1 2011 financial results on Thursday, April 14, after market close, and the earnings call will be at 1:30 p.m. PT. Jonathan Rosenberg, Senior Vice President of Product Management, announced on April 4 he would be leaving Google "in the coming months". Google reported excellent calendar Q4 2010 financial results on January 20, 2011. Google financial data, charts, and review is at the Google Financial Performance page, updated for the latest calendar Q4 2010 financial results. A review and analysis of the Q3 2010 earnings call is at the Google Earnings Conference Call page and will be updated soon for the Q4 2010 earnings call. Our updated valuation and target price for GOOG stock is posted at the Google Stock Valuation page. Revenues from outside of the United States were 52% of total revenues in the fourth quarter of 2010.

Google Product News Executive Chairman Eric Schmidt announced in February that 350,000 Android devices are being activated daily worldwide. Google announced One Pass on February 16 to counter the Apple announcement the previous day of an App Store subscription service. It does appear that Google is offering more favorable terms to publishers than Apple. Google was in the news in December as a result of the Google Chrome Event on December 7. In addition, Google announced the launch of the Samsung Nexus S Android (Gingerbread OS) smartphone and the opening of the eBooks Store. At the Google Chrome Event, the Chrome Web Store was launched, the Chrome Notebook was unveiled, which is planned to be consumer-ready by mid-2011 with Acer and Samsung as the first manufacturers, and Google announced the Chrome browser user base had increased +300% in 2010 with a conservative count of 120+ million active users. More innovation is coming for the Chrome browser, based on speed via Chrome Instant. Finally, Andrew Rubin tweeted on December 9 that 300,000 Android phones are being activated daily, which is a blowout number. This number - 300,000 Android activations - was reiterated by Jonathan Rosenberg, Senior Vice President of Product Management, during the Q4 2010 earnings call on January 20, 2011. This was after the negative news that the EU had launched an anti-trust investigation.

Economic and Market News Information about the USA and world economies is posted at Boom Doom EconomyFinancial Controls, and Baidu Planet. Additional current commentary on both the overall stock market and economy is posted at Matrix Markets.

Google Daily Chart

Google Daily Chart Below is the GOOG daily chart since October 14, 2010 to illustrate recent price interactions.

Noteworthy Closing Prices
Current Close: $578.16
2011 and Multi-Year High: January 18 $639.63
2011 Low: March 16 $557.10
2010 High: November 8 $626.77
2010 Low: July 6 $436.07
YE December 31, 2010: $593.97
YE December 31, 2009: $619.98
Cyclical Low November 24, 2008: $257.44

Google Chart Review
Intermediate Term Trend descending 25d sma < descending 50d sma, bearish
Long Term Trend GOOG > 10 month ema = 567.62, tenuously bullish, has been bullish since September 2010
Key Resistance 583-584, 587, 590-591, 594-595, 50d avg 596, 100d avg 598, benchmark 600
Key Support 20d avg 576, 200d avg 557, 557, 555
Moving Averages below 50d, 100d sma's, above 20d, 25d, 200d sma's
Uptrend Line above since 9-1-10, line from 11-24-08 cyclical closing low 257.44 up thru 7-6-10 closing low 436.07
Downtrend Line below since 1-18-11, line from 11-6-07 closing high 741.79 down thru 1-18-11 closing high 639.63
RSI 14 Day = 51.12 is reasonable, descending
RSI 28 Day = 42.77 is near oversold, ascending
MACD (12,26,9) = +1.09, descending
Volume low 1.9M latest day, 20 day avg = 2.7M, 50 day avg = 2.5M
Price Earnings Ratio 21.98, down from last week, below historical average just below 25

Conclusion Bullish sentiment for Google has waned as GOOG dropped 5 of the past 7 weeks. GOOG closed below $600 on March 7 and has not been able to regain this benchmark price. The 50 day average dropped below the 100 day average on Tuesday, April 5 - a Death Cross. Google tends to languish between earnings reports, as investor interest wanes, but this has been more of a drop than we expected. We expect Google to rally above $600 during earnings season (April). Google reported excellent Q4 2010 financial results, record-setting, on January 20 which are reviewed on the Google Financial Performance page  The announcement of a management restructure is reviewed earlier in this post and also here. A review and analysis of the most recent Q4 2010 earnings call is at the Google Earnings Conference Call. The intermediate-term trend turned bearish on Wednesday, March 9, 2011. The long-term trend is bullish. More about Google the value of GOOG stock on the Google Stock Valuation page.

Disclosure We have no position in GOOG. We are bullish on GOOG for 2011. If Google can break through the $600 benchmark price, we will most likely enter a long position with a trailing stop.

About Google

Google's market capitalization is now the 9th largest in the USA at $185.89 billion. This is behind #1 Exxon $426.19 billion, #2 Apple $308.68 billion, #4 Microsoft $219.05 billion, and #6 International Business Machines $200.06 billion (IBM passed $200B the week ended April 1, 2011). Google is the 4th largest technology company in the USA by market capitalization behind Apple, Microsoft, and IBM. Current Google financial data is at the Google Financial Performance page. A review and analysis of the most recent Q4 2010 earnings call is at the Google Earnings Conference Call page. More about the value of GOOG stock on the Google Stock Valuation page. Headcount: On a worldwide basis, Google employed 24,400 full-time employees as of December 31, 2010, up from 23,331 full-time employees as of September 30, 2010.

Google describes itself in press releases as, "Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google's targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia."

Google's Mission Statement: "Google's mission is to organize the world's information and make it universally accessible and useful. The first step toward fulfilling that mission came when our founders, Larry Page and Sergey Brin, working out of a Stanford University dorm room, developed a new approach to online search that quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- a free service whose utility and ease of use have made it one of the world's best-known brands almost entirely through word of mouth from satisfied users."

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