Google shares plunge after earnings miss target
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Wall Street showed no mercy to Google Inc. after the Internet search titan came up short on first-quarter earnings.
The stock slumped $47.81, or 8.3%, to $530.70 by the closing bell on Friday, ending near its low for the session. That took the price back to where it was in early October.
After trading ended Thursday Google reported first-quarter sales of $6.5 billion, topping expectations. But earnings of $8.08 a share slightly trailed analysts’ mean estimate of $8.12.
The company’s expenses surged in the quarter, squeezing the bottom line, as management spent more on new hires and marketing.
Google co-founder Larry Page, who returned as chief executive two weeks ago, also may have miffed investors by saying virtually nothing on the earnings conference call on Thursday.
‘We think the concerns about his leadership are overblown, but this was a missed opportunity to address that issue,’ Jay Welles, an analyst with Manning & Napier Advisors, told The Times’ Jessica Guynn.
Google’s miss weighed on the rest of the tech sector, although the damage was modest. The Nasdaq 100 index, dominated by major tech names, slipped 0.2% on Friday, while the stock market overall ended broadly higher amid some upbeat economic data. The Dow Jones industrial average gained 56.68 points, or 0.5%, to 12,341.83.
Among other tech giants, Apple Inc. fell $4.96, or 1.5%, to $327.46, its lowest since Jan. 21. Cisco Systems lost 14 cents, or 0.8%, to $17.03 and Microsoft Corp. was off 5 cents, or 0.2%, to $25.37. Many big-name tech stocks have been under pressure in recent weeks, in part because of concerns about slowing personal computer sales.
Not surprisingly, some blindsided analysts were busy Friday cutting what had become lofty 12-month price targets for Google’s stock.
Credit Suisse’s Spencer Wang took his price target down to $700 from $750. Mark Mahaney at Citi Global Markets cut his target to $650 from $750, and Ross Sandler of RBC Capital Markets trimmed his target to $680 from $700.
But for investors who believe Google is a relative value, it just got more so: The stock now trades for 15.6 times analysts’ mean earnings estimate of $34.04 a share for 2011 and 13.4 times the mean estimate of $39.57 a share for 2012.
These sure aren’t your father’s tech-stock valuations, if your father was buying tech shares in the dot-com-mania days of the late-1990s.
-- Tom Petruno