Google shares fall after Q1 report, stock split

Krystal Peak · April 13, 2012 · Short URL:

Google made $10.65B in the first three months of 2012, plans to split stock pre-Facebook IPO

Google stock fell 2.8% in early-morning Friday trading, after peaking up in after hours late Thursday, following the company's announcement that it was splitting its stock for the first time in its history. The stock closed Friday at $624.60 (down $26.41: 4.06%) the first day after this earnings announcement and stock split.

In its quarterly earnings statement Thursday, Google announced also announced that its revenue was up 24% year-over-year to a robust $10.65 billion.

The net income for the quarter was $2.89 billion, up $1.8 billion from the same period last year.

Citi Investment Research & Analysis's Managing Director of Internet Research, Mark Mahaney, still maintains its pricing target of $750 (which places the expected share price return at 15%.)

The investment analysis from Citi has found that Google’s successful positioning against three of the biggest current trends on the Internet (mobile, online ads, and cloud computing) have the company well placed to hit the expected pricing target, and lable GOOG a worthy investment.

It is worth noting that the paid click revenues were up a sizable 39%, while cost-per-click revenues were down 12% for Q1 -- perhaps due to availability or the influx of mid-sized and local business getting deeper into the online advertising sector.

Operating costs for the company were slightly higher year-over-year -- $3.47 billion compared to $3.34 billion-- but those costs were smaller percentage of revenues  -- 33% in Q1 2012 compared to 39% in Q1 2011.

Google’s GAAP net income in the first quarter of 2012 was $2.89 billion, compared to $1.80 billion in the first quarter of 2011.

The company now employees 33,077 full-time staff members as of March 31, 2012, an increase from 32,467 full-time employees at the end of 2011.

The company stated that the expected stock split would “preserve the corporate structure that has allowed Google to remain focused on the long term.”

While the first quarter earnings were close to expectations, the stock split was not buzzed about prior to the announcement.

In a conference call after the announcement, Google CEO Larry Page laid out his three main priorities as velocity, execution and focusing on the future with big bets. Page also pointed to the launched of Chrome for Android and Google Play as major developments for the past quarter.

And just as some people started speculating whether Google might have a major acquisition in mind, Page clarified that the company doesn't  "have an unusually big acquisition planned, in case you were wondering.” 

This stock split appears to be well-timed just weeks before the Facebook IPO is expected. The social networking giant -- and Google's largest competitor for ad dollars that make up 96% of Google’s revenue -- is going up on NASDAQ, the same exchange as Google, and the search engine wants to place itself in front of investors as a tried and true sure thing rather than an unknown and volatile investment.  

At more than $650 a share (NASDAQ:GOOG), Google is showing its tremendous staying power on the public exchange and, while the company has made statements about negative feelings regarding stock splits, the price per share has gotten to a point where it is unattainable for most of the general population to get a piece of. 

Each current shareholder will get an additional non-voting share for each share of Google stock that they currently hold and these new shares will also be used for equity-based employee compensation.

Stock prices are expected to start at $325 per share upon opening bell and should rise from that point due to the new inventory and demand at a more attainable price. 

Google made its initial public offering back in 2004 at $85 per share.


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