Search engine's 3Q sales beat estimates but earnings below expectations. Stock rallies after hours.
October 21, 2004: 4:58 PM EDT
NEW YORK (CNN/Money) - Google, in its first earnings report since its IPO in August, posted strong gains in sales and earnings from a year ago but earnings missed Wall Street's estimates. Nonetheless, the stock moved higher after-hours as Wall Street appeared to be excited about the solid sales growth.
Google reported net income of $52.0 million or $0.19 per share in the quarter, up from $20.4 million, or 9 cents a share a year ago. Excluding charges for a legal settlement with rival Yahoo! and the cost of stock options, Google reported earnings of 45 cents a share. The Wall Street consensus estimate was for earnings of 56 cents a share.
Sales for the search engine company came in at $805.9 million, up 105 percent from a year earlier. Excluding traffic acquisition costs (TAC), the advertising revenue that Google shares with partners, sales came in at $503 million. Analysts were expecting sales, excluding TAC, of $456 million.
Shares of Google (Research) gained $8.89, or 6.3 percent, to $149.38 in regular trading on the Nasdaq Thursday. Google has surged more than 75 percent since going public in mid-August on optimism about the company's fundamentals.
The stock initially slipped slightly in volatile trading after-hours following the release of the report, but shares then shot up nearly 3 percent as Wall Street began to digest the report, which was released first on Google's Web site and then across the news wires, a move befitting Google's reputation as a quirky, unconventional company.
Investors appeared to brush off the earnings miss, focusing instead on sales. Revenues increased 15 percent from the second quarter and excluding TAC, they were up nearly 19 percent sequentially.
That level of growth was markedly higher than what Yahoo! reported in its third quarter results last week. During a conference call with analysts, Google chief financial officer George Reyes said the expected seasonal slowdown in search-based advertising over the summer did not materialize for Google, thanks to strong traffic on the site. Reyes added though that flat revenue growth from the second to the third quarter will be the norm in the future.
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