Can Google Continue to Trend Higher?

With shares of Google (NASDAQ:GOOG) trading around $1045, is GOOG an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Google is a global technology company focused on improving the ways people engage with information. The business is based on the following areas: search, advertising, operating systems and platforms, and enterprise. The company generates revenue primarily by delivering online advertising. Google is a search giant with most of the market share, largely because of its execution and delivery. An increasing number of consumers and companies worldwide are coming online, which will surely increase the amount of eyes on the company's ads and, in turn, advertising revenue. At this rate, look for Google to remain on top of the Internet world.

Google agreed to pay $17 million to 37 states this week for evading cookie-blocking controls in Apple's (NASDAQ:AAPL) Safari browser, but industry experts suggest that the effect the settlement will have on the privacy debate is more significant that than the money penalty itself.

T = Technicals on the Stock Chart Are Strong

Google stock has has been exploding to the upside in the past several years. The stock is currently trading near all-time highs and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Google is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Google options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Google Options	18.44%	53%	53%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
December Options	Flat	Average
January Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Google’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Google look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	21.08%	-5.53%	13.60%	17.06%
Revenue Growth (Y-O-Y)	11.94%	15.52%	31.23%	24.87%
Earnings Reaction	13.79%	-1.55%	4.43%	5.49%

Google has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Google’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Google stock done relative to its peers, Yahoo (NASDAQ:YHOO), Microsoft (NASDAQ:MSFT), Baidu (NASDAQ:BIDU), and sector?

	Google	Yahoo	Microsoft	Baidu	Sector
Year-to-Date Return	47.88%	82.46%	40.98%	56.27%	57.89%

Google has been an average relative performer, year-to-date.

Conclusion

Google is an Internet giant that provides valuable search and advertising services to a growing user base worldwide. The company agreed to pay $17 million to 37 states this week for evading cookie-blocking controls in Apple's Safari browser. The stock has been exploding higher in recent years and is currently trading near all time high prices. Over the last four quarters, earnings and revenues have been increasing. However, investors have had conflicting feelings about recent earnings announcements. Relative to its strong peers and sector, Google has been an average year-to-date performer. Look for Google to OUTPERFORM.

Salesforce loses money, but masters art of dist…

Enterprise software is not a sexy business. They say you can put lipstick on a pig, but good luck gussying up terms like "customer relationship management" (CRM) and "enterprise resource planning" (ERP). The digestive functions of large corporations are important, and everyone benefits when they go smoothly; but usually, the less said about them the better.

So it's odd that Salesforce.com's annual conference has grown into such a big deal; the most recent one attracted more than 130,000 visitors. It's even stranger that Dreamforce has become so hip. This year it featured Alec Baldwin and Green Day – bad-boy actors and bad-boy bands. There were supermodels and prime ministers. There was a dress code.

Chalk it up to salesmanship. Last year's theme was "the Social Enterprise," a concept that appealed to everyone but Salesforce's clients. This year's campaign slogan was "the Internet of Customers." Subject matter included mobile devices, Big Data, gender bias in the workplace – anything but customer relationship management.

Which is to say that Dreamforce was all lipstick, no pig.

In that respect it was similar to a 3Q earnings season in which enterprise cloud firms concealed their losses with a smokescreen of buzzwords. During Salesforce's quarterly conference call, CEO Marc Benioff couldn't stop talking about his company's new mobile platform. He told analysts that he runs the entire company from his iPhone 5, and he informed them that "the world has changed. It's gone cloud, it's gone social, it's gone mobile and it's gone connected." When a representative from Goldman Sachs (NYSE:GS) asked him when we might expect profits from this brave new world, Benioff spoke vaguely of a "balance" between profits and growth -- an either/or proposition peculiar to cloud companies.

For its part, Netsuite focused on its acquisition of TribeHR -- for an undisclosed sum -- and something it calls "social HR." Workday talked about its new Big Data Analytics product, and recruiting software ! built "from a mobile perspective." Neither wanted to discuss net losses of $17 and $48 million, respectively, any more than Salesforce wanted to address a $124 million deficit. Netsuite and Salesforce both saw operating margins deteriorate year-over-year. Workday enjoyed some improvement, but remains the worst performer of the three.

These companies are adamant that the cloud is the future of enterprise software. Benioff compared legacy competitors like Oracle and SAP to Microsoft's Steve Ballmer, calling them "representative of the past." Netsuite's CEO argued that "the enterprise on-premise product is sort of like the flip phone of software." Both examples were colorful, and neither had anything to do with enterprise software. If a Web-based approach is better for corporate IT -- and in many cases it probably is -- then we should be able to discuss it without diversionary references to buzzy consumer technologies like mobile and social. If enterprise cloud companies have a clear advantage, then their first priority should be to explain to investors why a superior product requires inferior margins. The flip phone might be dying, but it's not because Apple took a loss on the iPhone.

If they were discussing their core products, these companies might tell us -- and every so often, they do tell us -- that the cloud's advantage lies in commoditization and integration. At one time, Salesforce offered a commodity CRM product that played nicely with other cloud software. Workday did something similar with HCM (human capital management). Instead of buying a farm, you could rent a cow from here, a chicken from there -- whatever you wanted, from whomever you preferred. As Netsuite's CFO put it during his company's conference call, "Cloud vendors all are looking to interoperate to make customers' lives easier, and that really is the key message."

Except it's not. The key message is revenue growth, and integration has been sacrificed in order to achieve it. Cloud vendors have expanded and acquired! their wa! y into new markets in an attempt to get their hands in as many cookie jars as possible. For Workday, this meant introducing a financial services product that competes directly with Netsuite. For Netsuite, it meant an acquisition of TribeHR that butts up against Workday's business. Netsuite has pursued Salesforce into social, and in an attempt to offer a "suite" of its own, Salesforce has partnered with Workday for HCM -- even as it builds an HR product of its own called Work.com.

Choose-want-you-want has deteriorated into pick-your-side, and cloud vendors are abandoning the openness that made them so attractive in the first place. The rise of proprietary app stores like Force.com only highlights the Napoleonic ambitions at play as firms compete to become platforms rather than equal citizens in the world of corporate IT.

Of course, this makes them pretty similar to traditional enterprise software companies like Oracle and SAP, which in turn have embraced a cloud distribution model. Despite all rhetoric to the contrary, the big difference between these groups is now something we're not talking about – the fact that Oracle makes money and Salesforce does not.

This story was originally published at Minyanville.

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