8% Dip Creates Buying Opp in Google

Posted by Adam Sharp - Friday, April 15th, 2011

Google shares closed down 8.2% after reporting Q1 earnings today.

Analysts are concerned over the firm's increased spending, as Google boosts hiring to fuel expansion in new business areas. Here's how Forbes reported Wall Street's reaction:

Adjusted earnings of $8.08 per share fell short of analyst expectations.

Net revenue rose nearly 30%, to $6.5 billion, but expenses rose 54%, and Google ( GOOG - news - people ) seems poised to spend even more on hiring and marketing.

Analysts really shouldn't be worried about Google's increased spending, in fact, they should be encouraged.

Google is already sitting on a warchest of $30b+ in cash. As a shareholder, I would hope they're looking for ways to invest that money in high-potential businesses, and they are.

Google isn't just carelessly tossing money around on crazy side projects. They're developing products like Youtube, which they bought for $2.6b. That site now generates more than $1b in ad revenue per year. It has already paid for itself, and the long-term picture is only getting brighter.

Google is also investing in their wildly successful Android mobile operating system, which analysts say could have a 50% share of the entire smart phone market by the end of 2012. That's impressive growth, and should prove to be a significant revenue source in coming years.

The alternative way to spend that cash, I suppose, would be a dividend. But Google is still in growth mode. Q1 revenue increased 30% from the same period last year.

I own Google from an avg price of $300, and will continue to add to that position on dips. I wrote another piece on Google's venture projects here.


More like this...

Google's Endless Ambition
These are exciting times for Google investors, as the search engine giant has diversified its platform significantly. What's next from the android powered market.

Google Takes on Visa
A behind-the-scenes brawl is under way over the multi-billion dollar payment processing market.

Silver Pandas