Tech Investing

GOOG Earnings for Q4 Among the Most Remarkable in Company History

By Tara Clarke, Associate Editor, Money Morning • @TaraKateClarke • January 29, 2015

GOOG earnings were released post-market today (Thursday). Don't let the expectations miss and post-earnings stock performance make you think GOOG has lost its luster...

Google Inc. (Nasdaq: GOOG, GOOGL) reported fourth-quarter earnings per share (EPS) of $6.88 - $0.20 under projections. Revenue came in at $14.5 billion (16.9% growth year over year), also under expectations by $110 million.

"Google's full year revenue for 2014 was $66 billion, up 19% year on year, and this quarter, our revenue was $18.1 billion, despite strong currency headwinds," Google Chief Financial Officer Patrick Pichette said.

GOOG stock is flat after the revenue miss. It shot down roughly 3.5% after-hours immediately after earnings release, and has since flattened out. Right now shares are down approximately 0.25%.

But ignore the bottom line miss. Ignore chatter about how Google's advertising has lost steam (the average price of Google's digital advertisements fell 3%).

This was one of the most remarkable Q4's in company history - and we'll show you why...

GOOG Earnings: A Formidable Q4

What makes these Google earnings particularly remarkable is the sheer number of groundbreaking innovations that flowed from Mountain View this fourth quarter, ended Dec. 31, 2014.

Take a look at what the company has been up to in just three months' time:

Google X - the company's "moonshot" research lab - announced it is developing a pill that will detect cancer and other diseases by sending magnetic nanoparticles throughout your bloodstream on Oct. 28. "Every test you ever go to the doctor for will be done through this system," Google X head of Life Sciences Dr. Andrew Conrad said. "That is our dream." The technology is at least five years off, but when this Google innovation comes to market, it will change the practice of preventative medicine.

The company began testing a feature that allows users to video chat with a doctor while searching for medical symptoms in October.

On Nov. 10, Google signed a 60-year, $1.16 billion lease to renovate three hangars in NASA's Moffett Field Naval Air Station just outside of San Francisco. The company did not specify what it plans to do with the space. However, we can make an educated guess. GOOG secured the Moffett lease via its real estate subsidiary Planetary Ventures. The subsidiary's purpose is for "research, development, assembly, and testing in the areas of space exploration, aviation, rover/robotics, and other emerging technologies."

On Nov. 11, Google-owned robotics company Boston Dynamics showed off a two-legged giant robot capable of emulating moves from 1980s film favorite "The Karate Kid." (You can watch that video here...) Boston Dynamics also makes four-legged pack bots for the Pentagon. Google has acquired at least seven robotics firms in the last few years.

Google formed a partnership with Elon Musk's SpaceX on Jan. 20. Google invested $1 billion in the private space exploration firm. Together, the visionary companies will attempt to bring the remaining two-thirds of the globe online. The Google-SpaceX team will develop satellites to accomplish the goal.

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On Jan. 21, a report from The Information revealed GOOG will enter the mobile service plan industry. That means customers unhappy with cellphone plans from industry giants AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) will have a fresh alternative. Google's mobile service project, dubbed "Nova," is likely to launch sometime in 2015. Some employees have already tested it.

And just on Jan. 27, the company announced its internet-and-cable service Google Fiber will roll out in four new cities: Atlanta, Ga., Nashville, Tenn., and Charlotte and Raleigh-Durham, N.C. The service, which offers Internet that's as much as 100 times faster than competitor services, has been met with glowing reviews in the three cities it has already entered (Provo, Utah; Austin, Texas; and Kansas City, Kan.).

Obviously Google has been spending a lot of money. There were more than $300 million additional operating expenses this quarter compared to the quarter before.

In the post-earnings conference, Pichette said of an increase in capital expenditures (capex) this quarter versus margins, "As far as capex goes, we'll invest in things like Google Fiber, which are capex intensive but have big growth potential. Google Play, they'd love to grow it 10x faster than it's growing today, even if it affected margins."

You see, Google's long list of forward-thinking moves in Q4 is a good sign for Google stock.

The Bottom Line: Google stock has lost nearly 14% in the last six months. Take advantage of that and buy GOOG at a discount, if you can afford it."I believe in this company for the long haul," Robinson said today. "It's like owning an ETF on cutting-edge future tech, but investors still get huge cash flow and profits right now, today."

Robinson expects Google will double its profits in about three and a half years. Keep in mind that a double on $1,000 invested in a $500 stock results in the same amount of money as a double on $1,000 invested in a $10 stock.

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