“We’re always interested in big, well-traded growth stocks that gap up strongly on earnings—such a move usually indicates something exciting is brewing. In Google, Inc.’s (GOOG, Nasdaq) case, the company is reinventing itself as its core online paid-click ad business slows from the rapid growth seen in the mid-2000s. The two areas management is most excited about are non-text display ads (such as those seen on YouTube, a site that now attracts two billion views per week), which are now bringing in revenue at an annual rate of $2.5 billion, and mobile (boosted by the firm’s Android platform, which leads to more mobile searches), which is tracking at a $1 billion run rate. These businesses helped Google crush earnings estimates last Thursday evening and left analysts scrambling to hike their outlooks. It’s not going to double in a month, but we feel the stock has upside as institutional investors build positions.
“Technical Analysis: GOOG topped out in January and underperformed the market for most of the next eight months. But after building a bottom, in the mid-400s, shares performed well as soon as the market got going on September 1, a small sign that the stock’s character was changing. And then the stock gapped up 11% last Friday on huge volume following its results. We think you can buy GOOG here or on any weakness.”
Michael Cintolo, Cabot Top Ten Weekly, 10/18/10