COMPANY DESCRIPTION

Google is a technology company. Co.'s business is primarily focused around the following main areas: search and display advertising, the Android operating system platform, consumer content through Google Play, enterprise, commerce and hardware products. As of Dec 31 2013, Co. operated in the following two segments: Google, which includes its advertising and other non-advertising businesses; and Motorola Mobile, which includes the sale of mobile wireless devices and related products and services. Businesses use Co.'s AdWords program and AdSense program to promote their products and services with advertising on both Co.-owned properties and publishers' sites across the web.

 

ECONOMIC MOAT

Google's moat is evidenced by its dominance in search. More Internet searches are performed on Google's servers than all other search engines combined, even as the competition has narrowed that technological advantage.  Google’s investment in Android operating system for smartphones and tablets yields more than 500 million Android devices in customers' hands. Android assures Google search on mobile devices. Estimates are that about 90% of mobile searches are performed on Google.  Google has developed entire ecosystem an alternative to Apple's iPhone and iPad. 

 

OUTLOOK

The company's core business remains in good shape. Advertising revenues continue to advance at a nice clip, amid strong increases in paid clicks (up 13% in the most recent quarter), even with a declining cost-per-click metric (down 7%). And, although currency headwinds may remain an issue in the near term, healthy top- and bottom-line gains still appear achievable for the full year. For the long haul, we believe GOOG will continue to deliver for double-digit increases in revenues and earnings per share. These shares remain a compelling choice for the 3- to 5-year span. In our opinion, capital appreciation potential over the pull to 2018-2020 is well above average.

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STRENGTHS

  • Global search engine dominance

  • Android's success is a growth driver in the mobile market 

WEAKNESSES

  • Excessive dependence on advertising

  • Limited success of Google’s social networks 

THREATS

  • Intense competition

  • PRISM electronic surveillance program issue highlights the data privacy concerns among users

  • Intellectual property infringement claims 

OPPORTUNITIES

  • Positive outlook for smartphone and tablet market

  • Display and mobile ad spend are growth drivers

  • Poised to benefit from growing online video consumption 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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