Q1 Preview: Analysts See Limited Upside for Google (GOOG); CPC Numbers Remain Concerning

Shares of Google (Nasdaq: GOOG) are trading up more than 1 percent early Thursday ahead of the company's first-quarter 2012 earnings release, expected out after the market closes.

The market is currently looking for Google to report earnings of $9.64 per share on revenue of $8.13 billion. Numbers compare with EPS of $8.08 and revs of $6.54 billion reported in the same period last year.

Shares moved about 0.7 percent lower through the quarter, ending March at $641.24. Google closed 2011 8.7 percent better. Over the last 52 weeks, Google has traded in a range of $473.02 to $670.25.

Google is the first major tech company to issue earnings and the results can set the tone for other consumer electronics, media, and search giants. Google shares generally show some movement following its quarterly report: the stock dropped a few points after last year's first-quarter report, popped on the next two, and then fell again last quarter.

Traders are expecting to hear some updated color on the Motorola acquisition.

For all the options traders out there, there is generally a volatility slam following Google's report. Historical volatility is currently low from a 5-day average perspective, but may move through the session. Implied volatility has been creeping higher since the last report, now situated at about 33.6 percent. Notably, implied volatility for weekly options is all but set in stone above 100 percent, according to market data.

Data from Bloomberg shows 35 analysts currently maintain a Buy rating on Google, eight are at Hold, and none rate Google at Sell. The Street's price target average is $719, ranging from $600 to $825. The median price target average suggests just about 12 percent of upside for Google over the next six to 12 months.

Analyst Comments

• Goldman Sachs is looking for non-GAAP EPS of $9.46 and revs of $8.06 billion. CPCs should have dropped about 6 percent, compared to an 8 percent decline last quarter.
  
  Goldman noted some possible downside to Google's forecast: "Our checks point to healthy online ad spend as click through rates remain elevated due to ad format changes rolled out in 2011. While our checks indicate CPCs remain a yoy headwind, we see the possibility of slight upside to consensus net revenue forecasts on higher click throughs."
  
  
• Deutsche Bank is looking for limited EPS upside in the first quarter, modeling earnings of $9.40 per share on revs of $8.075 billion. Deutsche said the company's outlook reflects, "mixed SEM data, limited currency-neutral Y/Y growth deceleration in Street numbers, and with the stock near recent highs heading into the seasonally weak 1Q."
  
  The firm is modeling for paid click growth of 22 percent, compared to 34 percent growth last quarter. TAC rates should remain about flat at 85.2 percent.
  
  Looking ahead, Deutsche expects management to issue color on FX headwinds, which the firm believes the Street is not accounting for in the second- and third-quarter, and FY12 numbers.
  
  
• BGC Partners sees revs of $8.2 billion and EPS of $9.71 BGC sees 1 percent sequential increase and 5 percent year-over-year increase in CPCs, commenting, "The concern is that the incremental search volume that is being created is lower priced inventory generated by mobile devices and format changes such as site linking. The drop in click pricing was even more startling when compared to the click price growth in the prior quarters of 2011 that ranged from 8% to 12% YoY. The key issue is if advertiser demand for the clicks generated by Google’s user base is cooling off, resulting in another quarter of a strong increase in paid clicks but a flat to declining click price."

Google Inc. will hold its quarterly conference call to discuss first-quarter 2012 financial results on Thursday, April 12th at 4:30 p.m. Eastern Time (1:30 p.m. PDT). The live webcast of Google’s earnings conference call can be accessed here.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Google's past performance at Streetinsider's Google's Income Statement.

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