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Google earnings estimates cut (again); Search budgets scrutinized; Shares fall

Updated: Wall Street is busy cutting its estimates for Google's fourth quarter amid multiple signs of a slowdown. However, analysts note that Google is a black box and the company could still prove to be recession resistant.
Written by Larry Dignan, Contributor on

Updated: Wall Street is busy cutting its estimates for Google's fourth quarter amid multiple signs of a slowdown. However, analysts note that Google is a black box and the company could still prove to be recession resistant. But investors aren't sticking around to find out.

On Monday, Barclays cut Google's price target. A day later, Goldman Sachs cut its targets for Google and lowered revenue projections. On Wednesday, Citi analyst Mark Mahaney followed up. Google doesn't provide an outlook so analysts are more often than not reduced to guessing. Meanwhile, Google broke the $300 mark (click to enlarge).

Mahaney's points:

  • Online advertising is slowing in the fourth quarter for the top e-commerce companies--Amazon, eBay, Expedia and Priceline. That'll hit Google at some point.
  • Search engine marketers are saying that the fourth quarter will be the weakest on record.
  • Top retailers are still getting traffic so monetization may surprise.

Add it up and Mahaney is cutting his revenue target by 3 percent to $4.16 billion with earnings per share down 3 percent to $5.03. Mahaney clearly isn't predicting a disaster, but Google estimates are coming down for the fourth quarter as search advertising budgets come under fire.

More interesting may be Mahaney's other data points. Among them:

  • Mahaney details numerous negative data points--results from IAC, Infospace and AOL--as problem areas. He also noted that Amazon, Blue Nile, eBay and others have indicated a rough fourth quarter.The big question: Is Google comparable to that gang? Probably not.

  • Marketing spending is mixed for e-commerce giants. See chart:

  • Mahaney says: "Clear caution about overall marketing spend – One of our consistent checks has been with the online marketing manager of one of the largest multi-channel apparel retailers. And this check, one of the savviest marketing executives we have come across, noted that almost all of his marketing budgets are being cut, with even his Search budget being severely scrutinized for the first time."

It remains to be seen how that scrutiny hits Google.

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