How This Tech King Stays One Step Ahead
cris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The recent upswing in the economies of North America has been a positive indicator for many businesses and this change has triggered a sharp increase in advertising spending. As a result, Google (NASDAQ: GOOG) and Baidu (NASDAQ: BIDU) are locked in battle over securing a greater share of the global search engine market.
Google comfortably enjoys a much larger share in the North American market than its arch-rival, Baidu. This fact clearly reflects in the overwhelming 66.4% market share that the company secures in the North American market.
However, Google's interest in tapping the revenue potential of emerging markets in Asia and its advances into the massive Chinese market have been impeded by its major competitor. Baidu has traditionally dominated the Chinese market with a massive share of 61% against Google's 31%. Nevertheless, the company has devised a series of strategic moves that are aimed at targeting a greater share of the emerging market where an increasing number of advertisers have sought web media platforms and search engines for e-commerce as well as video websites. Looking at the huge untapped revenue potential that exists in the colossal Chinese markets, I believe that the stock has made the right move by directing its focus here.
Google is currently riding the high tide, capitalizing on the impressive performance that it recorded in the first fiscal quarter of the current financial year when it reported revenues of more than $8 billion. A quick look at the stock's leading financial indicators and the favorable investor sentiment that it has attracted causes me to believe that it is poised for higher earnings per share and greater cash flows. Earnings per share of around $9.64 that the stock has recorded in the first fiscal quarter easily surpass the industry average. Google has recorded sizable gains year-on-year compared with $8 billion in profits and earnings per share of $6.5 in the previous year.
Google CEO Larry Page has recently announced plans to build great devices on the Android platform in collaboration with the recently acquired Motorola Mobility technology. Moreover, Google's recent announcement to split its stock on a 2-for-1 ratio is also expected to create a non-voting class of share. This strongly implies that cofounders Sergey Brin and Larry Page would ultimately maintain charge of the company. Both these announcements are being seen as positive developments that promise positive implications for the stock.
Google has had its fair share of legal disputes too, the latest in the string being its long-standing battle with Oracle. Although an out-of-court settlement was rumored to be the most possible outcome of a recently held conference, negotiations failed to bear fruit for the business as the parties were unable to reach a point of mutual understanding. As a result, the stock could not capitalize on the good news that the two companies were expected to announce at the end of the conference.
Another recent development that could prove to be a thorn in Google's side is the stringent scrutiny that its Motorola deal has faced by China's antitrust agency. The final outcome of these pressing issues plaguing Google will greatly determine the course that the stock will follow in the coming months. However, I see the recent announcements by the stock as positive developments that are certainly going to have a positive effect on the stock's upward movement.
Apple (NASDAQ: AAPL) is inarguably the traditional rival of Google with a trading price that has perpetually matched that of the stock. Apple has posted substantial gains in the current year, largely owing to the launch of the new iPad 3. However, Apple has recently been accused by the Justice Department of conspiring to fix the prices of e-books. An antitrust lawsuit has already been filed against Apple and this has affected the favorable run that the stock was seen enjoying recently. As a result, I believe Google currently shows more promise to investors than Apple.
Although counted among the major competitors of Google, America Online (AOL) has never really posed Google a major threat. America Online has a market capitalization of nearly $2.4 billion and an average trading volume of almost 2 million. A negative revenue growth of -3.20% and earnings per share of only $0.12 hold little promise for investors. Google has higher earnings per share and dividend payout ratio and this makes it a safer and more viable investment option.
Yahoo! (NASDAQ: YHOO) is currently following a positive upward trend and is trading at a price of almost $15. However, investors would want to take into account the stock's dismal earnings per share of $0.82 before they invest. A market capitalization of more than $18 billion and average trading volume of 17 million is impressive judging by industry standards and so is the price to earnings ratio of 18.21. However, when compared with a high-yield low-risk stock giant such as Google, Yahoo! fails to impress investors. Perhaps recent announcements by the stock are poised to bring about a positive change.
Yahoo! recently announced plans to launch a second season of its new web-based show hosted by the gorgeous Cat Deeley of "So you Think you Can Dance" fame. The stock has also led the global initiative to provide global DNT support. Yahoo! is, however, a relatively smaller stock when compared with its massive counterpart Google. As a result, Google continues to overshadow the business with higher market share, greater cash flows and more impressive financial indicators. I believe that Google is certainly the better investment option of the two.
jewishitalian31 has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
