Business Analytics – Marketing Paper

BusinessAnalytics – Marketing Paper

BusinessAnalytics – Marketing Paper

Googleis a large technology firm based in America. It focuses on servicesand products related to internet search, online advertising, andcloud computing. The company’s founders, Larry Page and SergeyBrin, started the company on 4thSeptember 1998 (Google,2016).Google first listed on the public stock exchange on August 19, 2004,with an initial public offer of 19,605,052 shares of Class A commonstock, at a price of $85 per share (Google,2016). The world highly anticipated Google’s initial publicoffering and the initial market capitalization was $23 billion. Theprice earnings ratio then was $ 80 (Ritter, 2014). As of May 2016,Google’s market capitalization stood at $ 82.5 billion. This paperanalyzes Google’s performance in the American stock exchange.

Analysis

Googleis best-known for pioneering the search engine revolution andproviding internet users of the world with a means of searching andfinding information at the click of a button. Nearly 70% of theworld`s queries pass through Google’s search engine, and 80% of theworld’s smartphones run on Android, an operating system developedby Google. Google leads the Internet advertising market. It has thehighest annual revenue in the advertising industry. Googleconcentrates on improving people’s accessibility to information. Itinvests heavily in ways of arranging data in an accurate and orderlymanner. Google’s approach is revolutionary for the Internet economyand by extension, the global economy because it helps corporations,individuals, and consumers search and access information aboutanything anywhere and anytime.

Google’sstock trade on the NASDAQ which is the second biggest stock exchangeis the world (Ritter, 2014). The biggest is the New York StockExchange (Ritter, 2014). It was founded on February 4, 1971 andtrading started three days later. It was the first automated stockmarket (Ritter, 2014). Google has a long history because it has beenin operation for some time.

Forthe past decade, Google stock has experienced various ups and downs.After the initial offering, the stock climbed steadily until February2006. At this time, the share value fell by 10% because of the lowearnings of the company in that month. Most of Google’s income wasfrom advertising facilitated by its search engine. It became evidentthat the company had fully exploited its advertising capabilities andtherefore needed to come up with new methods of growing its revenue(BBC, 2006). In May of the same year, its share value dropped by 11%as a result of the company’s announcement that it would sell 5million shares. The company sold the shares to meet the market demandfor its stocks (Pimentel, 2014). However, there was worry that theundertaking would cause stock dilution since the company had justoffered 14.8 million shares in September of the previous year(Pimentel, 2014). In the month of October, its stock experienced anotable increase of 4.6% toclose at $480.78 as a result of the optimism that surrounded theexpected earnings of the company and a deal that Google had made withYouTube (Monica, 2006).

In2007, after Google bought YouTube, the share price dropped by 10%.The company was under pressure from broadcasting companies fortelevising copyrighted material on its search engine (Pimentel,2014). In the same year, its share recorded the highest value closingat $714.87 on December 7, 2007.

In2008, the stock did not perform well. Firstly, at the beginning of2008, the stock fell by 18% in January, closing at a low of $274.14on 31st January 2008. It again fell by 17% in February, closing at$235.59 on February 29thas a result of the low earnings that were reported by the company dueto the harsh economic times and the reduction in online advertising.In June and July of 2008, the share value again dropped by 10% afterthe company failed to deliver the expected profit estimates. Theshare price continued to drop significantly throughout the year thecompany faced a global slowdown as a result of the fall. The declinebecame worse towards the end of the year, and Google reduced thenumber of contract workers it had (The Wall Street Journal, 2008). Inthat year, the share closed at $ 153.83.

In2009, the stock price began to rise steadily, and the trend continuedin subsequent months. On December 31st, the share price closed at $309.99. In 2010 when Google was marking its sixth anniversary sincethe initial public offer, the stock price was down by 20%, but ascompared to the original offer price, it had increased by 389%(Mareano, 2010). In 2011, the share price reduced further by 10% inAugust as a result of Google’s entry into the electronics andhardware market. The company was facing more competition from newentrants like Facebook as well as a Chinas search engine known asBadu (Monica, 2011). However, for the remaining part of the year, theshare value increased, and it closed at $322.95 on December 11th.

InJanuary 2012, Google’s stock value dropped after it missed theearnings estimates for that year. The low earnings of the companywere attributable to its move to advertising on mobile where Googleads brought in less income. Advertising on mobile devices at the timewas not profitable. In April 2012 Google announced its quarter oneearnings. They had increased by 24%. The company also stated that itwould split its stocks. Google stock price rose to $ 650 per share,and the split caused a share to go for $ 325 (Streitfeld, 2012).

Afterthe successful stock split in 2012, the price of Google’s stockcontinued to increase over the years with occasional drops in variousmonths. The earnings of the fourth quarter of 2013 rose by 17% fromthe previous year’s results for quarter 4. It affected the stockprice, and on 31st December 2013, it closed at $ 560.36. In the year2014, the results of the second quarter were better than expectedcausing Google’s share price to increase. Also, the increase in thestock price in 2014 was due to the fall of Facebook’s stock.Individuals stopped perceiving Facebook as a threat to Google (Doorn,2014).

In2015 July, Google’s stock price increased by 62.26% to close at %699.92 as a result of the high second quarter income. The stock valuehas continued to increase, closing at $ 802.03 on 7th November 2016.The good performance is attributable to Google’s acquisition ofYouTube, increased advertising, and revenue from its software andhardware divisions.

Noparticular method precisely determines the performance of a companyand comes up with accurate forecasts for stock performance. From thefundamental research of Google’s books of account, the statement offinancial position indicates that the three-month revenues of thecompany as at September 2016 was $ 22,451 million.Itis clear that the revenues of the company have an increasing trend.The company has high reserves which have an upward trend. As ofSeptember 2016, the reserves were at $ 99,798 (Google, 2016). Anindication that the company can still pay out dividends and stillmaintain a high share price even when making losses.

Thereis high demand in the global market for tools like search engines,and since Google is the most popular search engine among individuals,it will continue to be profitable in the years to come. Also, it isan established company, and therefore it will continue to sell and tolead despite competition from companies such as Facebook who alsowant a share of the online advertising industry. Google’sacquisition of new applications and soft wares resulted in increasedprofitability and widening of its market base.

Conclusion

Adecade after Google started trading its stock price has risen by alarge margin. Historically, its stock has been one of the bestperformers in the stock market over the last decade. It continues tohave a high stock value. Google is performing better than itscompetitors. As at 7th September, the stock closed at $ 802.03. Theabove analysis shows that investing in the company is a good ideasince it seems to have a profitable future as viewed in the currentperformance of its stock and the overall performance of the business.

References

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