Navivest Stocks and Options Blog

Google’s Stock Falling As Markets Rally

Jun 21, 2010 Stock to watch

Google (GOOG) is down today and falling, even as the broader stock market is rallying, with all the major stock indices posting very strong gains.

At 10:38, Google is down $5.22 to $494.81. There is no news out on the company. that’s impacting the stock and this might be more of a technical trading issue, with Google shares facing resistance at the $500 area, which the stock has had a time clearing in the prior four sessions.

Tags: google, Technical Analysis

Google Shares Underperforming Market Today

May 12, 2010 Stock to watch

On a day when all the major stock market indices are rallying and the tech laden Nasdaq is leading the way, shares of Google (GOOG) are down $4.05 to $5.05. There is no apparent news on the company.

Tags: google

The Technical Trader – Google

May 3, 2010 Uncategorized

Google’s (GOOG) stock, which closed at $595.30 on April 15, have fallen to $530.60 (05/03/10). At current levels, the stock may not only have found support, but is also forming a triple bottom. Multiple bottoms are generally bullish technical signals and we could see Google shares rebound from current levels, assuming the stock market holds up.

On March 24, with Google having pulled out of the mainland China market, we posted a Google Baidu (BIDU) trade that recommended shorting Google and going long Baidu. Google was at $541.33 and Baidu was at $610.42. Google is down $10 since then and with Baidu closing at $708.99 on 05/03/10, we are up $98.57 in those shares. Obviously, we are closing out the Google short position here.

Tags: baidu, google, Technical Analysis

Goldman and Google Send Stocks Crashing

Apr 16, 2010 Company News, Stock Market, Stocks On The Move

2010 Q1 results from Google (GOOG) after the bell yesterday, and news that the Securities and Exchange Commission is suing Goldman Sachs (GS) for fraud, sent the stock market into a tailspin today.

Google reported that for the Q1 period ending March 31, it had revenues of $6.775 billion and net income of $1.955 billion or $6.06 per share on a diluted basis, $6.76 on a non-GAAP basis. This actually beat Wall Street analysts’ consensus estimates, which were $4.95 billion on the revenue side and $6.60 on a per share basis. However, some analysts were looking for Google to exceed a “whisper” EPS of $6.76 per share.

Stocks opened a tad lower, with the Dow opening down just 0.91 points, on Google concerns, but by 10:18, we were back up in positive territory, although we saw a mild reversal again to the downside. Then at about 10:40am, the market was hit with the news that the SEC is suing Goldman Sachs for fraud.

The SEC is charging Goldman Sachs “for making materially misleading statements and omissions in connection with a synthetic collateralized debt obligation (“CDO”) GS&Co structured and marketed to investors.” According to the SEC, “this synthetic CDO, ABACUS 2007AC1, was tied to the performance of subprime residential mortgage-backed securities (“RMBS”) and was structured and marketed by GS&Co in early 2007 when the United States housing market and related securities were beginning to show signs of distress.”

In otherwords, the SEC is alleging that Goldman Sachs sold faulty products that it knew or should have known is faulty.
Furthermore, the SEC is charging that hedge fund company Paulson and Co, which was part of the CDO’s portfolio selection process, helped Goldman pick the specific mortgage securities that made up the CDO, but then Paulson and Co then turned around and bought puts (protection against downside moves) on certain aspects of the CDO. From the SEC’s standpoint, being that Paulson was in effect short the portfolio, it was in its interest to select components to go into the CDO, that it knew would experience credit events in the future, in which case, Paulson would profit.

The SEC further charges that Fabrice Toure, the Goldman Sachs employee who devised the transaction, misled ACA Management LLC (“ACA”), an outside third-party that analyed the credit risk in the underlying residential mortgage-backed securities, into believing that Paulson invested about $200 million in the CDO, when this was not the case.

Google lost $45.15 or 7.59% to close at $550.15, while Goldman Sachs was off $23.57 or $12.79%, to close at $160.70.

Tags: goldman sachs, google, sec

Google Shares Tanking On 2010 Q1 Results

Apr 15, 2010 Company News, Earnings

Google’s (GOOG) stock is being sold off in after hours trading, with the shares down $17.30 to $577.75, a 2.9% decline, at 4:18 PM, on the company’s latest earnings results. This despite the fact that the results actually beat estimates.

For the first quarter period, Google is reporting revenues of $6.775 billion, from $5.509 billion in the same period a year ago. Net income was $1.955 billion from $1.423 in the Q1 period a year ago. Earnings on a per share basis, was $6.06 on a diluted basis, compared to $4.49 per share a year ago.

Traffic Acquisition Costs or TAC, which refers mostly to the fees Google pays to outside sites that display Google ads, came in at $1.71 billion. TAC totaled 26% of advertising revenues. On a non-GAAP basis, Google is reporting earnings of $6.76 per share.

Analysts had been looking for the company to report revenues of $4.954 billion and earnings of $6.60 per share. As can be seen, the company beat handily on both the top and bottom line. However, the stock is reportedly being sold off because there was an earnings whisper number of $6.76 per share.

Tags: Earnings, google

The Google Baidu Trade

Mar 24, 2010 Trading Idea

Google (GOOG) shares have pulled back since January 12 of this year, when the company announced that it had been the target of sophisticated hacking attacks in China. After the attacks, Google announced that it could no longer censor its results in China, as was required of it by the Chinese government and speculation arose that the company might exit the China market. The company went into negotiations with China to see if this could be facilitated, to no avail.

On Tuesday, March 23, the company announced that it was now redirecting traffic to its Chinese website google.cn, to its Hong Kong website. One can expect that the Chinese government won’t sit by idly, while Chinese users of Google access uncensored content on the internet. So we can probbably expect that access from mainland China to the google.com.hk site will soon be blocked. There is also the risk that most of Google’s Chinese advertisers will soon stop advertising on google.cn,, so as not to upset their government. Should that happen, we can expect further drops in Google shares.

Google’s Chinese competitor Baidu (BIDU), which was already running circles around Google in the Chinese market, with a 57% market share is poised to immediately reap the benefits if Google no longer operates in China. As such, we might soon see some analyst upgrade of Baidu’s shares.

On January 11, Google closed at $601.11, while Baidu closed at $400.57. Today, Google is at $541.33, while Baidu is at $610.42 and climbing.

The Trade:

Traders could put on a pair trade and short Google shares, while going long Baidu. We will probably see divergent moves in both stocks in the very near term. A pair trade helps to minimize risk and if it works as planned, increases the profit potential. Alternatively, a better trade would be to just buy Baidu shares, since that would cost less upfront. Traders could use margin to either make the trade more affordable, or just to increase the number of shares being purchased.

For more trading ideas, visit the Navivest website at http://www.navivest.com

Tags: baidu, google

Google Announces “New Approach To China”

Mar 23, 2010 Company News

Google (GOOG) announced today that it had stopped censoring its search results in the Chinese market, which is required of all internet operators by Chinese government orders. To facilitate this, the company is directing all traffic to its Google.cn site, which is/was the company’s Chinese version of Google.com to Google.com.hk, the company’s Hong Kong version of Google.com.

This is the result of a tiff between Google and the Chinese government, which started back in January, when Google discovered that it had been subjected to sophisticated hacking techniques, which resulted in the hackers gaining access to and monitoring the Google email accounts of activists and dissidents in China.

On January 12, the company made public the attacks and also announced that because of the attacks and the “persistent blocking of websites such as Facebook, Twitter, YouTube, Google Docs and Blogger” by Chinese officials, the company could not continue to censor its search results.

Google had been in talks with China to see if there is a workaround, but those were obviously and predictably fruitless.

While Google has seemingly found a way to sidestep censoring its search results, this is very temporary, unless the Chinese government wants to play nice. They can block access from China to Google.cn at any time and worse they can put pressure on Chinese advertisers who won’t be looking to upset their government.

That said, Google, which used to deride Microsoft (MSFT) for being an evil corporation, but itself has the potential of becoming very dangerous, being that it collects data on its users and keeps that data forever, has now become the good guy poster child in the fight against communism, censorship and basic human rights. So with some savvy, the company can mine this one and gain some serious goodwill. Beyond just press mentions however, the company is in fact now in the position of being able to help battle communism in a meaningful manner.

It’s a safe assumption that China won’t loosen the reins any further because of this Google spat, but Google could continue to fight and a few more Chinese will become more embolden and realize that their government should not be controlling their lives so much. Blocking indecent content is one thing, but obviously, the Chinese government has a very wide definition of what’s indecent and at the end of the day, Google can help some Chinese citizens realize that when it comes to certain things, their government is only interested in protecting themselves while suppressing and maintaining too much control over its own citizens.

Tags: china, google

Stock To Watch – Google

Mar 21, 2010 Stock to watch, Uncategorized

Shares of Google (GGOG) might come under pressure this week, if rumors that the company will announce on Monday that it is pulling out of the Chinese market, turn out to be true. If on the other hand, the company announces that it has reached a compromise with the Chinese government, the shares might rally.

Google as with all other internet companies, is required to censor the content that Chinese consumers access through its platform. This results in blocked content for those users. For instance, searchers in China searching Google for “Fulan Gong” a Buddhist/Taoist based religious group that the Chinese government deems a cult, or Tibet, which China invaded in 1950 and has occupied since or the Dalai Lama, the Tibetans’ spiritual leader, will come up short and their search results will not return any non-Chinese government sponsored sites on those matters.

With the potential profit potential of operating in the world’s largest country a motivating force, Google has willingly operated in China under the Chinese government’s censorship guidelines. However, in January, Google found out that the Google email accounts of some Chinese dissidents had been compromised via very sophisticated techniques, which led Google to conclude that the Chinese government was behind the attacks. The company has since been in a public war of words with the Chinese government, while in the background, the company is holding talks to see if a compromise can be reached. Needless to say, the Chinese government is not about to allow any internet company, especially a foreign one, provide fully unfettered access to global internet content to its citizens. As a dictatorship, you have to wonder about and be paranoid about what your citizens might do if they if they got too much information.

Google shares are right at support levels at $560 and on one hand, one would look for a trading move to $560 or even better if Google announces it is staying in China. On the other hand, the overall market is overbought and Google has this possible pullout out of the Chinese markets acting as a negative overhang on the shares. As such, a near-term downside move is a strong possibility.

Tags: google

Google Recovers Slightly From Yesterday’s Drop

Mar 16, 2010 Company News, Stock to watch

Shares of Google(GOOG) recovered a bit from yesterday’s swoon, rising $2.02 to close at $565.20. Rumors are swirling that the company might pull out of the Chinese market, if the Chinese government is not willing to bend on its strict censorship rules for internet companies.

Google has until March 20 to renew its certificate to operate a website in China. Pulling out of that market could cost the company about half a billion in revenue.

Tags: china, google

Stocks On The Move – 03/15/10

Mar 15, 2010 Company News, Stock to watch, Stocks On The Move

Shares of Google (GOOG) dropped $16.36 to $563.18, on concerns that the company might pull out of the Chinese market, as it doesn’t seem likely that the Chinese government is willing to give in on its censorship rules for internet companies.

Google’s shares dropped backed in January, after the company revealed that hackers had gained access to the Google email accounts of rights activist in China. The sophistication of the breach led to speculation that the Chinese government was behind the attacks, leading to concerns then that the company would give up the China market.

Google’s Chinese competitor Baidu (BIDU), rose $26.60 to $576.84 on the Google news, as it would be the most likely beneficiary of Google pulling out of the Chinese market.

CNX Gas Corporation (CXG) rallied $4.23 to $30.46 for 16.13%, after its parent company Consol Energy (CNX) said it is considering buying the CNX gas shares that it does not already own. Consol Energy was off 10% on the news, with a $5.48 decline to $48.85.

Shares of Amylin Pharmaceuticals (AMLN) were up $3.24 to $23.50, a nice gain of 15.99%, after the company revealed that the Food and Drug Administration had issued a complete response letter regarding the New Drug Application (NDA) for BYDUREON(TM) (exenatide for extended-release injectable suspension) to it and its development partners for the drug, Eli Lilly and Company (LLY) and Alkermes (ALKS).

Because the letter makes no request for new pre-clinical or clinical trials, it is assumed that the FDA is reviewing the drug favorably. LLY rose $0.08 to $36.01, while ALKS was up 41.80 to $14.01.

Business software maker Chordiant Software (CHRD) was up $1.18 to $4.99, a 30.97% gainer, on a buyout offer from Pegasystems (PEGA). Pegasystems will acquire the company for $5 per share or $161.5 million in an all cash deal.

Pegasystems rose $2.47 to $39.30 on the news. The deal is expected to close in the second quarter this year. A month ago, Chordiant rejected a $3.46 per share offer from CDC Software.

Apple (AAPL) was off $2.76 to $223.84, as technology shares came under pressure on the Google/China news.

Oil and gas producer Apache Corp (APA) was down $2.53 to $104.35 on a downgrade to Equal Weight, from Overweight by Morgan Stanley. Lower oil prices also weighed on energy shares.

Tags: alkermes, apache, apple, baidu, google