What’s Holding Google Stock Back?

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Google Glass Sergey Brin

Google Glass Sergey BrinA lot of market observers are scratching their heads as to why Google (NASDAQ:GOOG), of all companies, isn’t really joining in the recent tech rally. Whether you’re following biotechnology stocks, social networking stocks, or mobile app stocks, it would be hard for you to miss the current rally going on. It seems that almost everybody is making money off the stock market, as long as they’re in the tech space. In fact, you don’t even have to make money to see your stock blast off like a rocket. Case in point: Twitter.

With that said, there is a solid tech company that is a giant in its field. It’s making billions and billions of dollars every single quarter but compared to its smaller competitors are well as the much hyped tech stocks in its space, it doesn’t seem to be going anywhere. I am of course talking about search engine giant Google.

Why has the stock market fallen out of love with Google? This is the only fair way to describe what’s happening with this search engine giant because this company used to move upwards very decisively. Now, it seems to be stock in limbo.

Some critical analysts say that the market is giving Google a pass. A lot of these critical analysts are saying that Google deserves to be priced much lower than its current market valuation. On the other side of the equation are analysts who point to the fact that Google dominates the search engine space and is doing quite well in mobile applications. What’s going on?

Well, if you’re truly looking for the answer and are not persuaded by hype, the answer is actually quite simple. The answer is earnings estimates. You have to remember that Wall Street can be quite unforgiving and vindictive if companies don’t meet their earnings projections.

The worst part is the earnings projections are set by analysts not the company itself. The company can give guidance but at the end of the day, it’s the analysts setting their expectations. If the companies being followed do not perform based on these metrics, the market hammers the stocks of these companies. In fact, your company only needs to miss analysts’ consensus estimates by even a penny, and your stock can tank.

This is what ‘s happening with Google. It’s missed close to half of its earnings estimates in the past eight quarters. It is no surprise then that the market has been quite merciless as far as Google’s stock is concerned. Of course, merciless is a relative term. While Google’s stock hasn’t been appreciating as much as its cohorts, it hasn’t exactly been crushed by the market either.

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