Are People Too Bearish On Google?

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With shares of Google Inc. (NASDAQ:GOOG) trading at around $714.98, 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:

C = Catalyst for the Stock’s Movement

Let’s get the “bad” news out of the way first. There has been considerable insider selling at Google over the past six months. However, if you look at the past few years, there is always considerable insider selling at Google. The reason people get nervous is because the amounts are so high, but keep in mind we’re talking about company with a market cap over $235 billion, not a small-cap where insiders are going to sell shares for a few thousand dollars. The next concern is bearish option bets. Bearish option bets are at an eight-year high for Google. Some people might see this as a reason to worry, but it’s important to note that you should never look too much into option bets because they’re often used as hedges.

Google bears might want to point out that Google is losing momentum in the mobile ad space area. Sure, Google might be losing a little momentum, but its revenue in the space still dominates Facebook (NASDAQ:FB). It has been projected that Facebook will soon pass Google for mobile ad revenue. I don’t see this as likely. Even if it does happen, Google will likely regain market share in short order. This is a company that never backs down from a fight, and it almost always wins. Facebook has proven many people wrong with its recent successes. I must admit that I was one of them. However, I can’t get around the “active user” number. Facebook likes to state that it has 1 billion active users per month. That might be true, but only by Facebook’s definition of active users. The company considers active users as anyone who visits the site, as well as anyone who engages the site through application protocol interfaces through a third-party site or tool. Therefore, anyone who clicks on a Like button from a blog is considered an active user. The real active user number is much lower than you think if it only pertains to people visiting Facebook.com. The point here is that Facebook might be proving people wrong at the moment, but in the long run, it won’t be capable of manipulating its way past Google in any area for a sustainable period of time.

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A lot of attention is often given to Facebook insiders, but let’s not forget that Google is quietly run by brilliant and innovative people. For example, look at Google Glass. Not only is this a brilliant creation, but Google is now looking to expand on it. Google recently applied for a patent to project images like a keyboard and other images on Google Glass.

Google won’t stop there. Google is also attacking Apple (NASDAQ:AAPL) in the music space. Google will offer a music service that will allow customers to buy over 13 million songs from the Android market. Google is making an aggressive play at taking market share away from iTunes, which is the last thing Apple needs right now. From a business standpoint, Google’s timing to attack a company while dealing with a lot of negative publicity is wise.

Now let’s take a look at some important numbers for Google.

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