Hey Google Gamblers! Belly Up To Q4 Craps Table

As Google's recent gyrations have illustrated, the stock is now firmly in the thrall of fear and greed.  Down 9% one day.  Up 5% the next.  Up 2% at 10am.  Down 2% at 11am.  "Eighty times free cash flow--We can't take the risk!"  "Biggest opportunity in the history of the world--We can't afford to miss it!"

Making matters more interesting is the stock's apparently frightening valuation.  No investor in his or her right mind would ever pay 60X forward estimated free cash flow for a company this size, so the (sane) bulls must believe that estimates are still too low and that Google will at least double free cash flow this year and grow it another 50%-75% in 2007 (making the real cash flow multiple a more palatable 30X-40X).  Any hint that Google will no longer blow away Street estimates, therefore, and the stock will tank. 

On the other hand, given the hair-trigger panic demonstrated last Friday, there does seem to be some skepticism around.  As Battelle noted, a Yahoo! search employee has predicted a Google Q4 whiff, and his blog has no doubt been extensively scrutinized by bulls and bears alike (presumably contributing to Friday's panic).  So blow the numbers away again, and the stock will pop.

What's the risk/reward profile?  Probably an instantaneous gain or loss of at least 10%-20%.  Is it possible to get enough of an information edge to make the odds of either outcome better than 50/50?  Given that Google is probably the most-analyzed stock in the world right now, I doubt it.  But this presumably won't stop thousands upon thousands from placing their bets.

So in the spirit of entertainment--which, for those who lack material inside information, is all this really is--Internet Outsider hereby inaugurates the first quarterly Google Earnings Sweepstakes. 

As of this writing, the Street consensus net revenue estimate for Google's Q4 is $1.29 Billion.  To enter the Sweepstakes, please post a comment containing:

1) Your Google Q4 Net Revenue estimate, and

2) Your prediction, expressed as a percent, of where the stock will open the next morning (e.g., "+13%" or "-21%").

To increase the entertainment value, please feel free to share some of your logic.

What do you get if you win?  Glory.  A prime posting of your name and winning prediction on Internet Outsider.  Of course, because market forecasting involves two assumptions--1) fundamentals, and 2) market perception of such fundamentals--the Sweepstakes may have two winners.

Good luck!  May the best soothsayer win...

Comments

[Walker]

1) 1.15 billion
2) -8%

I'm really talking out of my ass right now, but that's how I see it. Yes, I own google stock. Yes, I'm 18 years old. Yes, I sold half of my google stock when it reached $400 (I really couldn't imagine it getting any higher).

[shinkdew]

1) $1.29 billion
2) -18%

[Ryan]

$1.24 Billion

Stock drops 14.65%

[JD]

Bush administration will see to it that Google receives it comeuppance, then the stock will make that giant flushing sound. Why do you think they are being so cooperative with China? Google knows that once privacy rules are breached that their business model in U.S. is screwed.

[Ian]

$1.31 billion. Offer mediocre guidance

Stock opens down 6%.

[Jonathan Berr]

$1.5 billion, down 6%.

[phr]

1,365mm, stock goes to ~$490-500 as street estimates for 2006 rise above $10 and 2007 estimates hover around $14.50.

math is simple, comscore sequential query qrowth in US is 22%, pricing up 5% let's say, international kicker, plus monetization kicker (3rd link appeared in back half of Q3). Only swing factor is currency, but with Euro flat q/q, I'm pretty comfortable with 30% sequential revenue growth for Q4.

[phr]

in response to JD, Google doesn't give guidance,.

in response to Ian, if they do 1.5 billion in Q4, the stock will be up 30%, not down 6%. 1.5b would represent a quadrupling of Yahoo's sequential growth.

[Goldfine]

$1.39 billion
+14%

Ready to trade, with nimble fingers...

[Jojo]

1.31 billion $
+ 5%

Google will profit from gaining more market share, primarily international.

[chris]

$1.29B
-10%. they will be thoroughly punished for 'not' blowing out the quarter, despite the fact the street estimates are very aggressive to begin with.

[k]

$2 billion
+20%

The argument against the DOJ was nothing but a PR stunt to hopefully maintain and expand user base (smells like money here!) Do I hear: "Do no evil unless it pays well. To hell with human rights, freedom and democracy as long as we make lots of money"?

Should we protect pedophiles but let the poor Chinese people who're desperate in the fight for freedom and democracy get rotten in prisons and concentration camps? If you can't help them, at least don't discourage them or help their oppressors.

The only thing that's worse than evil is evil masked under a nice face. Other companies may continue to do business with communist and totalarian countries such as China, but at least they don't hide under a nice motto or pretend to be nice guys.

No matter what, with new business in China, future earnings look quite rosy, expect revenues and profits to ramp up exponentially in the future.

[lance]

Google is not protecting pedophiles. The subpoena relates to children accessing adult pornographic materials, not the other way around.

[MattyDread]

$1.45 billion.
+4%

Why only 4%? Because bulls have already built better-than-"expected"-earnings into their assumptions. All that happens if they beat is a few more bears hold off on selling.

Now, if they fall short, look for a huge drop.

[Gabriel Dubois]

In comparing GOOG to YHOO Revenue/EPS results I’ve used a quarterly search index [QSI] that measures the relative performance of each versus their Q to Q results. This index shows Google with an 18.9% volume increase in Q4 versus 0.7% growth for YHOO. Put this in the context of YHOO's 13% sequential revenue increase for Q4 and GOOG should experience, by comparison, 31% sequential revenue growth in Q4 plus an additional 4% due to Variable-Term-Pricing.

YHOO
- Q3: QSI +7%
Revenue +6%

- Q4: QSI 0.8
Revenue +13%

GOOG
- Q3 : QSI +15%
Revenue +14%

-Q4 : QSI 18.9%
Revenue 35%

GOOG Gross Revenue for Q4 $2132
TAC [32%] $682
Net Revenue $1450

Next morning stock price impact +20%

[Praveen Kumar]

1) $1.30B
2) -6.5%

[Mr.Me]

1.19

+5%

[Victor]

Hi Henry, this is a good article on click fraud:

http://moneycentral.msn.com/content/P140206.asp

'You see, Google tells its customers beforehand that there will be click fraud, and it even accounts for that in its pitch. That's right, when Google tells a customer that they can expect X return on investment (ROI) when using Google's ad network, Google's already included click fraud in those numbers. So in essence, the only way for this supposed click-fraud issue to really become problematic is if it's worse than Google realizes. Consider it the online marketplace version of Wall Street's "worse than expected" scenario.'

[Efstathios Maroulis]

$1.22Bn
-14%

[KH Stroem]

$1.34 Bn
+3.45%
Reasoning - while beating estimates many will use the opportunity to cash in on their bet and cover their bases. Net-net the stock will close up on healthy volume.

[Franck]

$1.6bn +20%

Reach of Google has significantly increased recently and is now greater than both MSN and Yahoo. Online shopping in Europe has exploded this year (up to 50% in the UK for example) which means more clicks for Adwords than anyone else since Google has a 71% market share there. Even in the US Google Search has continued to increase market share at the expense of both Yahoo! and MSN. Today from a revenue standpoint, Google is just a single product company. Should they announce new initiatives (like VOIP) or show significant traction in the new product line (like Video), stock price could jump 30%.

[C Lavey]

$1.41B Stock opens -12%, closes -5%. Results will be stellar, guidance will not. Higher capex and stock compensation expenses will surprise the street.

[Bruce Hamm]

$1.44B
Opens (-17%)

[Tom Kedman]

$1.6B, stock opens up +10% (~$40-45)

[Tom Kedman]

$1.6B, stock opens up +10% (~$40-45)