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What's wrong with Google? (2014 a bad year for shareholders)

What's wrong with Google? (2014 a bad year for shareholders)

Google may be a good place to work, but lately it hasn't been a good place to invest. 2014 has been a bad year for shareholders.

Quotes of technology companies in 2014

Google shares have fallen almost 10% in 2014 and they're near their 52-week low.

Obviously, its CEO Larry Page cannot be very happy with the situation, especially considering how well the competition has done this year:

  • The actions of Microsoft they have risen more than 25%.
  • And also those of Yahoo!, thanks to the huge momentum of Alibaba's IPO.
  • The actions of the Chinese search king Baidu are up 30%.
  • The actions of Manzana they have risen almost 40%.
  • And those of Facebook they have risen more than 40%. In the latter case, Facebook competes with Google for the global advertising market capacity.
Source: money.cnn.com

But why has Google had such a bad year?

1. The competition is getting tougher in all fields:

  • Online Advertising Market: It seems that Facebook has stolen a bit of momentum from Google in the online advertising market. According to research firm eMarketer, Google is still the world leader, with a 31% share of total digital advertising revenue this year, but its market share declined a bit, while Facebook's increased from about 6%. to about 8%.
  • Mobile advertising market: Facebook is also gaining ground on Google in this field. The social network's mobile advertising market share increased to 18.5% this year, from 17% a year ago, while Google's fell from 47% in 2013 to 40.5% of this year.
  • Online Video Income: Facebook has also boosted its video initiatives, and there is growing concern that the social network will take over online video revenue from Google's video site YouTube.
  • Mobile device market: Apple's resurgence is negative for Google, whose Android mobile operating system is Apple's main rival to iOS. Android's main partner Samsung has lost market share this year, while Apple has regained its appeal thanks to the iPhone 6 and 6 Plus.

2. Risky acquisitions:

Google has made several acquisitions this year that could increase its revenue streams beyond advertising, but which to average investors may seem like strange and risky bets.

  • Buying from the connected device manufacturer Nest for $ 3.2 billion
  • Acquisition of the drone manufacturer Titan Aerospace
  • The acquisition of the satellite company Skybox Imaging

These acquisitions could turn out to be a very smart move down the road, but the deals also reinforce Google's idea as a company willing to throw a lot of spaghetti on the wall to see which one sticks.

For example, the purchase of Motorola Mobility It didn't pay off in 2012, and earlier this year Google sold a significant chunk of Motorola to Chinese hardware giant Lenovo for a fraction of what it paid just two years ago.

These types of transactions can be a problem when shareholders are more focused on short-term profits than long-term strategic planning.

3. Could it be an overreaction?

Google has been through this before. Shareholders were skeptical of previous deals such as YouTube or the DoubleClick advertising network; acquisitions that have certainly paid off.

The company remains the undisputed leader in the field of online advertising, despite having lost some market share.

AND you are not in a difficult financial situation eitherGoogle has $ 62.2 billion in cash and analysts are forecasting sales and earnings per share to grow 18% in 2020, which is pretty impressive for a company the size of Google.

Despite all this, at the moment the value of the stock is trading for just 17 times the earnings forecast for 2020. That is, a little cheaper than Microsoft and considerably less than Facebook and Yahoo.

That's why Brian Wieser, an analyst at Pivotal Research, recommended "Buy" Google shares on Wednesday, though he acknowledged that Google would be better off "focusing on advertising and limiting its diversification efforts to the private investment options of its executives."

However, investors are treating Google as if it were just one more in the field of online advertising, despite being the undisputed market leader. Perhaps all the negative things about Google have already been factored into the share price.

Ramón Pedreño addresses the same issue in his blog Investment and Finance: What's wrong with Google?

The original story appeared in the Money Section of CNN.com: http://money.cnn.com/2014/12/18/investing/google-stock/index.html

Video: 10 29 2014 Shareholder Conference Call Recording (September 2020).