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-Well, Google earnings out just moments ago and that stock is trading down in a big way.
Let's bring in top analyst, Tom Forte, with Telsey Advisory Group.
Tom, do you think this drop in stock after hours is justified based on the numbers that we see, particularly costs per click which were down 6%? -Sure, I do.
I mean, I think if you look at Google, the stock has been-- has had a really nice run and I think there's a lot of people who like it, but I do think that investor sentiment has been a little too positive.
People forget the bear story that it still could be a challenge -- this transition to mobile and that Motorola is still very much a work in progress.
-Well, did you forget the bear story, too? I mean, your estimates were even higher than-- you were not exactly at the whisper number of $11, but you were at $10.92 and the consensus estimate was $10.78.
The actual number, as you see, $9.56.
So, where did-- what did you think would do better that has really disappointed? -Sure.
If you look at the quarterly results, we're projecting a slight improvement on a sequential basis in cost per clicks.
We're looking for 0.5%.
That came in down 2%.
The question is what if any impact of the change in foreign exchange rates have on that result? But I think that, basically, the story here is that the company has done really well, but still faces some challenges, the Motorola being one of them and the mobile transition being the other.
-Well, let's talk about Motorola, the Motorola unit.
The numbers look bad no matter how you spun it, but you say that despite the bad numbers short term, it needs Motorola unit, that units particularly to protect it from Samsung.
So, if you look at the mobile operating system landscape, you have Apple's iOS and you have Android for Google.
-In the market share among the original equipment manufacturers, Samsung has a dominant position.
Google needs to have another manufacturer -- Motorola, LG, HTC -- someone else to be strong, so it isn't just Samsung.
So, they need to have Motorola to work, but I do think it's very early to assess that.
-How long can they continue to believe that unit? -Well, okay.
So, the new product, Moto X, is expected to come out by October.
According to published reports, they're gonna put a lot of money to merchandise the item, to advertise the product.
So, I think that until that unit comes out-- -By the way, explain what Moto X is.
So, Moto X is their next-generation Smartphone.
This will be really the first Smartphone developed by Motorola since Google bought them.
So, this could be a breakthrough product for the company.
Too early to assess Motorola which right now is very much, you know, work in progress.
-Dennis is our media guy, but he's also big listening to buzz on the street.
I haven't heard too much buzz about Moto X.
Dennis, have you? And if so, what are you hearing? Is this one of these must-have phones that people are talking about? -Well, think of what the very smart guest just said that Moto-- that the Google is so worried about Samsung being too dominant in the phone business that it spent billions of dollars to buy a cellphone company, a troubled one, and it's got a-- it's got a problem now.
How about you let cellphone makers do that? Maybe, Google never should have bought a cellphone company.
I couldn't understand how buying a cellphone company, a troubled one, will help Google sell more ads.
-I think they wanted the patents, right? -That's what Google's business is.
-I mean, didn't they find the patents exciting? -And they're totally sure there's a patent, but you know what, it's a real stray from their core competency.
When I was just out in Sun Valley, I had a talk with a just resigned high up Google executive.
We talked about the company, how great the driverless car is, and Google Glass.
And I kept saying what about your core business, what about selling more ads.
Now, their paid clicks were up, what, 23% in the quarter.
So, it's okay that the price was down only 6%, but Google sometimes thinks they can solve all the problems of the world.
This company spent a billion dollars because they were certain that they can fix the energy crisis and ultimately said, "Oh, you know what,-- -Right.
-not so much" and wrote it off.
-I think that the company just focus on its business.
-Well, I gotta give our guest a chance to respond to what Dennis said because he's challenging your position with regard to the core competency that in fact Google is getting away from that as a result of Motorola, but also would you buy the stock at this price? Has it come down enough for you to buy it? But first of all, to respond to Dennis, go ahead.
Actually, I like a lot of what Dennis is saying,-- -Uh-huh.
-which is I think about for a while that I think Google is getting too much credit for Google Glass, for automated cars, things that aren't part of their core business and things that may never materially hit their income statement.
So, the way I look at it, our price target is $966-- -Wow.
-It's 17 times multiple.
Seventeen percent is the long-term EPS growth rate.
I think that's a very reasonable price.
At 800 bucks, you're looking at 20% upside.
So, I'd be a buyer at 800 bucks.
-So, you're a buyer.
Okay, guys, thank you very much.
Dennis, great stuff.
Tom Forte, appreciate it.
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