Google investors had an incredible day on Friday after reporting their earnings for the second quarter. Today, we're going to look into the details of the earnings, how the market reacted to the report, and what we can expect to see from Google moving forward. So, let's get right to it…
Google's Earnings Details
As expected, Google released their second quarter earnings report today; and the results were impeccable.
Revenue – In the quarter, Google reported a revenue of $17.7 billion. This proved to be a growth of 11% year over year. However, this growth was hampered by the strong dollar. If currency rates remained constant year over year, the growth would have been an 18% jump!
Earnings Per Share – Earnings per share in the quarter came in at $6.99; $0.28 more than analysts expected to see.
GAAP & non-GAAP Income – Both GAAP and non-GAAP operating income grew at a great rate; 13% and 16% respectively.
Operating Cash Flow – Finally, Google proved to have a strong operating cash flow. That figure came in at $7 billion for the quarter.
How The Market Reacted To The News
Any time we see positive earnings, we can expect to see positive movement in the stock as a result; and that's exactly what we saw from Google today. Following the company's release of earnings, Google stock had its biggest day in the market yet. In a single day, Google's market capitalization rose by $66.9 billion; a 16.3% increase. This brings Google's current market cap to $478 billion. To put the gain of $66.9 billion into perspective, there are more than 400 companies traded on the S&P 500 with a market capitalization that comes in lower than $66.9 billion.
What We Can Expect To See Moving Forward
In this particular case, I have two conflicting views; depending on how far in the future you plan on looking. Here's how I see it…
Monday & Tuesday – If you only plan on looking as far as Monday and Tuesday, chances are that what you're going to see is losses. This is general market movement. It's important to remember that price movements in the market are a series of overreactions; and it would be hard to argue that this isn't the case for today's climb. Therefore, on Monday and Tuesday, I'm expecting a slight correction to bring the value of Google down to a rate of more sustainable proportions.
Long Term – In the long term however, I'm expecting to see big gains. Google has proven time and time again that they are a company that is capable of generating positive earnings. This time, it's even more impressive; given the current state of the worldwide economy and the strong United States dollar. Since investors are ultimately looking for growth, and Google is definitely capable of generating growth, it simply wouldn't make sense to see long term declines.
How Binary Options Traders Can Benefit From The Trends
As mentioned above, I'm expecting to see a bit of downward movement on Monday and Tuesday as a reaction to today's exorbitant growth. Therefore, on Monday and Tuesday, traders should watch the charts for resistance. When the price hits resistance, it's likely to decline; leading to profitable put option opportunities. On Wednesday, I think it will be time to start looking for support and opportunities to gain from call options.
What Do You Think?
What are you expecting to see from Google moving forward? Let us know in the comments below!