Right behind mighty PCLN, GOOG is closing in on the $1,000 per share club after earning $2.97Bn or $10.74 per $970 share. What? Oh sure, yes, $10.74 is just 1/90th of $970 BUT, keep in mind there are 4 (four) big quarter and 4 x $10.74 is $42.96 and GOOG was expected to earn $43.50 this year anyway and though they were SUPPOSED to make $10.34 so, of course a .40 beat means the stock should pop $10%, right?
While $970 (a p/e of 22.5) may SEEM high for a company who's revenues only grew 12% (well behind the industry average 20%) where else are you going to stuff $29Bn of Uncle Ben's funny money overnight? That's right, within minutes of the stock market closing, GOOG jumped 10% and added $29Bn of market cap in a matter of minutes. I know $29Bn may not seem like a lot to us anymore but it is 29,000 Million dollars.
On average, GOOG trades less than 2M shares a day x $800 = $1.6Bn so, from a cash-flow perspective, in order to sustain that price Google will need all 2M of those trades to be buys (all inflows) for 18 consecutive days to put enough cash into the market to justify that jump. Luckily, that's not how the market works and usually it takes just 1/10th of the money coming in to "justify" a bump in price but, still, that's a lot of inflow needed to support this bump.
Still, we have to give props to the move and, technically, they are busing out and a technical market is what we're in, so we're not going to get short on GOOG but we will keep tight stops on our 2015 $800 calls, which we paid a virtual $115.07 for in our Long-Term Portfolio and shame on us if we don't take what's likely to be a double off the table if it starts to fade on us. See last night's Member Chat for our thoughts on how to play that position, as well as ISRG and CMG – all very exciting today.
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