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Google Shares Plummet in After-Market Trading on Earnings Miss

Published by: Frank Galvano on 30th Jan 2015 | View all blogs by Frank Galvano
Google Shares Plummet in After-Market Trading on Earnings Miss
 
Google shares plunged in after-hours trading as investors absorbed the tech giant's disappointing fourth-quarter earnings report.  The shares, which closed Wednesday's session at a value of $512.86 per share, fell as low as $503.66 per share during Thursday's session, then continued dropping after the market closed, bottoming out at just under $491 per share.  At that point, Google's stock price had fallen nearly 20 percent since February 26th, 2014, when the stock reached a record value of $610.70 per share.  Over the same time frame, the S&P 500 has gained just under 9 percent and the Nasdaq has climbed almost 10 percent, all while Google's biggest rival Facebook also gained 10 percent.

Google's fourth quarter earnings fell well short of analyst expectations, and so did its revenue.  Economists in a recent Bloomberg survey projected that the search giant would earn $18.46 billion in the final three months of 2014, and bring in a profit of $7.12 per share for shareholders.  The company reported earnings of $6.88 per share, meanwhile, on total revenue of $14.45 billion.  The massive revenue miss, the company noted, was largely due to the strengthening US dollar, which drove a gross negative currency impact of $616 million.  Another major factor was the declining prices the company charges for its pay-per-click ads, where the majority of its revenue comes from.
 
As they have for several years now, investors are concerned about how the company will replace lost revenue as more and more Americans resort to mobile devices for their computing needs.  The average price Google charged per click, which has been declining for the last three years, fell three percent in the fourth quarter as compared with the same quarter a year earlier.  The company continues to explore new sources of revenue, as it spent $2.8 billion in research and development in the fourth quarter.  That represents a 33 percent jump in R&D expenses from a year ago, but shareholders are still wondering when those expenses will translate into earnings.  The company did create some buzz in the fourth quarter with its new Nexus smartphone, but was unable to keep up with demand because of a parts shortage.

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