History Is on Google's Side

 | Oct 13, 2011 | 2:30 PM EDT
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This evening, Google (GOOG) reports third-quarter earnings.

The Internet search giant always announces earnings ahead of Yahoo! (YHOO), which announces next week, so we don't have a heads up for what to expect.

On the surface, all is calm and Google's stock price has been ramping with the broader market recovery of the past week, as well as on hope of a good call later today. The stock is up 7% in the past five days compared with 3.4% rise for the Nasdaq Composite in the same period. Google stock is also up today, despite a down market, adding $3.61 to $552.11 in afternoon trading.

It's probably because people are hoping that CEO Larry Page has got his sea legs under him after last July's earnings call. After some robust top and bottom line results, Google's stock jumped from $528 to $622 about a week later.

Most are expecting similarly strong results today.  Analysts expect, on average, earnings of $8.74 per share on $7.21 billion in revenue.  Keep in mind the June quarter delivered $8.74 in EPS, which was a big beat of the $7.85 consensus.

But the third quarter is historically a big one for Google, so many bulls are feeling good right now about the stock.

I don't have a position in GOOG, but I would be very concerned that Yahoo!'s second-quarter problems in display might bleed over to Google this quarter. Recall that Yahoo! had "sales management" issues -- seemingly company-specific things.  But I expect there was another factor at work here: Facebook.

It's just anecdotal, but I have the impression that many small and large businesses are doing much more advertising on Facebook lately.  That will surely hit Google as much as Yahoo!. It also seems likely that this potentially secular trend has continued this quarter and that, in part, likely led to Carol Bartz's ouster as CEO last month.

So, now we'll see if this has affected Google, too.

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