Today's Major Market Move - Google (GOOG) Up 13% for the Day

Yesterday afternoon Google (ticker: GOOG) announced their 2nd quarter results and the stock immediately shot up after hours. It ended today's trading session up a little under 13%. Results were better than expected on both the top and bottom lines, with revenues coming in at 6.92 billion (6.54 expected) and GAAP earnings coming in at 7.68 (6.78 expected). The stock is now only down 5% for the year; it took a big hit earlier in the year when the first quarter missed by a wide margin (actual eps: 5.51, expected 7.88).



Google's earnings are back on the track that analysts expected at the beginning of the year. I wouldn't be surprise the next couple of quarters of earnings estimates to be revised higher in the near future. Here's a chart of % growth of acutal eps, exepcted eps and stock price (with the just-released quarter not yet included):

Google may be considered a high tech company, but the bulk of their revenues still come from advertising and they are probably more exposed that most other software/internet companies to macro fluctuations. As shown in the above chart, GOOG's earnings were hit hard during the apex of the crisis at the end of 2008. The fact that GOOG missed big in Q1 of 2011 before QE 2 had a chance to fully kick in may also be more than a coincidence.

Make no mistake, this was a stellar earnings report and Google's core search business remains impregnable. Beyond search, Android is a clear hit but is not creating any direct revenue since Google is still giving it away, YouTube generates ad revenue but I haven't seen the detailed numbers to know exactly how much of an impact it is having and even with all the recent hype surrounding Google+, how much staying power will it really have? Facebook appears as entrenched in social media as Google is in search.

(Click on the images for a larger view.
Click here for the current chart of GOOG stock price.
Click here for the chart comparing % growth of eps actuals, eps estimates and stock price.)

Today's Major Market Move - Akamai Technologies (AKAM) down 40% for the Year

It's been a few days since we've covered an individual equity so today we're going to take a look at Akamai Technologies (ticker: AKAM) for our Major Market Move feature. Akamai has had a rough 2011, dropping 40% since January while the S&P 500 index is up 2.8%. AKAM has been the third worst performer of the S&P 500 this year, after Eastman Kodak (ticker: EK) and Tellabs (ticker: TLAB). (Ignore BLL, FAST and HRML in the following chart, their stocks have all split and we're still in the process of updating our historical data).


After their stock price recovered from the 2008-2009 crisis, it collapsed again after missing estimates in the last 2 earnings announcements (although it was only by a penny each time). Here's the chart of eps actuals vs. eps estimates:

And here's the chart of % growth of eps actuals and eps estimates along with stock price:

It's been a wild ride since 2008, with the stock first dropping 40% during the financial crisis, then surging up 80% in "stimulus" phase, and finally coming back down to being essentially flat. Akamai's next earnings announcement is on 7/27, and according to this analyst on fool.com, they should meet or beat with strong forward guidance. His rational:

Streaming volume should be up -- helped by a re-up of its relationship with Netflix (Nasdaq: NFLX ) -- while the introduction of Apple's (Nasdaq: AAPL ) iCloud should provide more downloading work. (Though, as analyst Dan Rayburn rightly points out here, the bigger opportunity would be a video version of iCloud.)

There's also e-commerce and mobile to consider. A new survey from the Pew Research Center finds that 35% of Americans now own a smartphone. Of this group, 87% access the Web or email on their device with 68% using these services daily.

As far as the most recent quarter is concerned, Netflix has been around since 2003; has their growth rate surged all of a sudden in the past few months?. I also see it being too early to even decipher what the future growth rate is going to be for iCloud (it was only just unveiled a little over a month ago). Google (ticker:GOOG), who has struggled in the early part of 2011, just announced a bang-up quarter so that may bode well for AKAM also getting out of the dole drums.

(Click on the images for a larger view.
Click here for the current table of the performance of stocks in the S&P 500.
Click here for the charts of eps estimates, eps actuals and stock price.)