Google Shares Stage a Comeback

By Douglas A. McIntyre Updated Feb 20, 8:18AM EST · Published Feb 20, 6:55AM EST

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Google Inc. (NASDAQ: GOOG) has developed the reputation as a poor investment. It was one of the worst-performing huge tech company stocks over the past year. In 2015, Google’s shares have made a turnaround as they have swung to matching the performance of the hot Nasdaq index. Perhaps the market decided Google’s main business of search cannot be replaced, flanked or even modestly challenged. Also, it has gotten into some businesses with growing value.

In the past 12 months, Google’s C shares are down about 3%, compared to a 15% improvement in the Nasdaq. The company’s most recent earnings raised concerns because of moderating growth and a modest yield per ad clicked on by visitors, which is a critical measure of Google’s health. Some investors believed this was the start of a permanent, slow decline.

ALSO READ: Does Google Have Billions in Hidden Assets?

Among the arguments against Google is that online ad market share has begun to tilt toward Facebook Inc. (NASDAQ: FB) and that other social media will start to take share as well. Lost in this analysis is that Google still holds roughly two-thirds of the market share in its primary business in the United States. Its position in much of the rest of the world is as good or better. Admittedly, Google probably will never dominate search in some of the world’s largest countries, particularly China, with its Internet population of over 600 million. Baidu.com Inc. (NASDAQ: BIDU) has the People’s Republic locked up.

Among the things Google does have going for it is a revenue base of $66 billion, which grew 19% last year. At that growth rate, revenue will reach nearly $100 billion in two years. Google’s net income in 2014 was $17.2 billion, so the search company has an operating margin of an extraordinary 25%.

Also lost to many investors is that YouTube finally has started to come into its own, after years of near dormancy. YouTube has begun to draw an impressive list of advertisers, and it has a nascent premium streaming operation in a time when streaming media has started to become a real business. Google’s Android OS has been criticized as contributing nothing to the company’s sales. However, it has been a remarkable Trojan horse as it has helped push Google’s search onto hundreds of millions of smartphones. There is a strong argument that without Android that would not have happened.

Google is more valuable than its one-year stock price performance shows. Recently, the market has started to catch up to that opinion.

ALSO READ: The Businesses That Will Build Future Growth at Google and Amazon

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.