The readers have spoken.
In the last day, approximately 25 Internet Outsider readers have entered the Google Earnings Sweepstakes. I have eliminated one outlier that seemed preposterous (famous last words) and averaged the rest. Here’s what we’ve learned:
IO Reader Google Q4 Net Revenue estimate: $1.379 Billion
IO Reader Google “Next Morning Open” prediction: -0.006%
The average Net Revenue estimate calls for sequential growth of 32% and year-over-year growth of 111%. The 32% sequential growth would modestly exceed last year’s sequential growth in this period of 30%. The year-over-year growth would constitute a modest acceleration from the 109%, 110%, and 108% in the first three quarters of the year. The IO Reader consensus is in line with the highest Street analyst estimate (per Yahoo! Finance) and 7% above the Street consensus of $1.29 billion.
Interestingly, the average Reader Market Reaction estimate is, essentially, zero (-0.006%). This means that, in aggregate, IO readers think the market is doing what it is supposed to: appropriately discounting the expected Q4 results. It also means that the true market (or, at least, reader) expectation for the quarter is $1.379 Billion, not the $1.29 Billion that the Street is formally forecasting. Of course, Street analysts tend to aim low, especially when they like a stock, so it seems reasonable to assume that the IO Reader expectation is pretty much in line with the real Street expectation.
Which suggests that, all else being equal (which it isn’t–we’re only talking revenue), if Google does less than $1.379 Billion in net revenue, the stock will drop. If it does the printed Street consensus of $1.29 Billion, the stock will drop a lot (the word “tank” seems appropriate). If it does $1.379 Billion or more, the stock will rise. And if it does $1.45 Billion or more–in line with the higher IO Reader estimates–the stock will skyrocket.
What do I think? I think the IO Reader consensus is certainly within the realm of reasonable. If you put a gun to my head and made me play, I would put my estimate around $1.325, slightly above the Street and slightly lower than the IO Reader consensus. I would expect the stock to drop modestly on that (still remarkable) performance.
Given Google’s extraordinary performance thus far in its history, it is certainly possible that the company’s growth will accelerate on a year-over-year basis, but there is no way I would be comfortable estimating that. Even suggesting that the company will be able to MAINTAIN its shocking growth rate is scary. At some point, gravity–and market saturation–will take hold, and growth will slow dramatically (and take the stock price down with it). The only question is when.
Reminder: I don’t own Google and this blog does not contain investment advice.