Google (GOOGL) Stock Falls on Ad Concerns

Shares of Google (GOOGL) are down more than $33, or 6%, at $530.10 in premarket trading after the search giant reported first quarter revenue and EPS that missed Wall Street expectations.

Google had previously closed up 3.75% just after the bell on Wednesday. The company reported $6.27 earnings per share on revenue of $15.42 billion for the quarter, up 19% from a year ago. The consensus estimate was for EPS of $6.42 on revenue of $15.52 billion. That translates to $3.45 billion in net income, compared to $3.35 billion in FY 2013. Revenue ex-traffic acquisition costs in the three months ended March 31 was $12.19 billion compared to the consensus estimate of $12.25 billion.

That’s a miss on top and bottom lines, which is why both class A (GOOGL) and class C (GOOG) of Google stock declined by a little more than 5% following the earnings report, which also highlighted problems in Google’s core department: search.

During the first quarter the number of paid clicks on Google’s online ads jumped 26% year-on-year. Historically, it’s been up about 30% in good quarters. Meanwhile, the average cost-per-click that marketers paid Google declined 9%, extending a downward trend in mobile ads. While the 26% gain overshadows the per-click decline, the downtrend seems to persist as Google can’t obviously charge what it once did for paid clicks. This, as a result of smartphones dragging down prices for digital ads. Bloomberg reported that the cost-per-click for search ads on small screens dropped 35 percent during Q1 in the US, while ad prices on tablets rose.

All told, Google did not meet Wall Street expectations, despite delivering a healthy quarter.

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