Can Google Break Higher?

With shares of Google (NASDAQ:GOOG) trading around $550, is GOOG an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Google is a global technology company focused on improving the ways people engage with information. The business is based on the following areas: search, advertising, operating systems and platforms, and enterprise. The company generates revenue primarily by delivering online advertising. Google is a search giant with most of the market share largely because of its execution and delivery. An increasing number of consumers and companies worldwide are coming online, which will surely increase the amount of eyes on the company’s ads and, in turn, advertising revenue. At this rate, look for Google to remain on top of the Internet world.

Google is taking to the skies. The tech giant just acquired Skybox Imaging, a startup specializing in satellites that take high-quality images while in orbit. While the company currently has one satellite in orbit, more are planned, giving Google quite the view for its maps applications. The company already gets satellite data from various companies that have satellites in orbit. This is how Google Maps and Google Earth have their extensive photo stores of pretty much everywhere in the world, in addition to flights the company uses to gather the data. Buying a company that makes satellites allows Google to start to cut out the middleman by owning a satellite of its own. The company still needs the approval of American regulators to proceed with the deal to complete the purchase. Google has made another high-flying purchase recently: Titan Aerospace, which specializes in drones designed to carry Internet connectivity, although those devices can collect images, too. Skybox was purchased for improving applications like Google Maps and Google Earth, both of which depend on visual data.

T = Technicals on the Stock Chart are Mixed

Google stock has struggled to make significant progress in recent times. The stock is currently pulling back and may need time to consolidate before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Google is trading between its rising key averages which signal neutral price action in the near-term.

GOOG

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Google options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Google options

25.74%

93%

90%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Average

Average

August Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.