â€œWe are concerned about the disintermediation of search by apps and this couldÂ impact core search growth. While this is extremely difficult to quantify, qualitatively, we believe thatÂ consumersâ€™ increased dependence on mobile and apps is negatively impacting GOOGâ€™s core search.â€ So begins Macquarieâ€™s â€œbottom line for 2015â€³ for Google.
Macquarie is the latest in a string of investment banksÂ to strikeÂ a note of caution when it comes to Google. Also lastÂ week, JP Morgan revised its estimates for Googleâ€™s stock downwards, from $670 to $600 per share. (Google closedÂ at $516.35 on Dec. 19.) â€œWe are lowering our estimates on Google for 4Q14, 2015, and 2016 to account for slower organic growth, continued strength in the USD, and ongoing investment opportunities,â€ analysts wrote in a research note to clients.
Earlier this month, Bank ofÂ America/Merrill Lynch downgraded Google stock fromÂ â€œbuyâ€ to â€œneutral,â€ citing â€œsearch maturity, lack of product catalysts, and margin pressure to investments in competitive and long-duration businesses like cloud computing and retail delivery.â€ Even CEO Larry Page is worried. In October, Re/code reported he would be stepping back from day-to-day operations to focus on the â€œbigger picture.â€ (Google declined toÂ comment.)
So what is going on? GoogleÂ is facing challenges on many fronts. There are three main reasons for worry. First, it is being attacked in search byÂ pretty much everyone. Second, the company has yet to figure out a way toÂ transfer its money-making prowess to mobile, where ads are cheaper and where users tend to prefer apps over browser-based searches. As Macquarie analysts note, â€œEvery query that a consumer conductsÂ through Amazon, eBay, Yelp, OpenTable, and others is a query that does not run through Google.â€Â Finally, Google is facingÂ tremendous regulatory pressures, particularly in theÂ European Union.
And Googleâ€™s performance this yearÂ has hardly been sterling. The stock is down 8% from the start of the year whileÂ New Yorkâ€™s SP 500 index is up 12%. Facebook is up 46% (see chart above).
Google is not in imminent danger. There remainsÂ greatÂ opportunity in video advertising on YouTube andÂ inÂ making money from appsÂ on Google Play. Nor is GoogleÂ going to stop growingÂ orÂ raking in vast amounts of cash from search, even if the speed at which it does so will slow. And according to data compiled by Factset, 84% of analysts recommend buyingÂ Google stock right now,Â versus only 69% this time last year. Then again, Googleâ€™s stock priceÂ has fallen short of (admittedly traditionally optimistic)Â analyst expectations for the past two yearsâ€”and the gap is only getting wider.
Article source: http://qz.com/315917/suddenly-google-is-surrounded-by-pessimism/