Google Meets EPS Targets; Shares Still Sag

Google released their Q1 2010 earnings today and despite beating analyst estimates handily, their share prices dipped sharply.

Google, which was trading at $595.30 in heavy volume when markets closed, saw its share price drop nearly $30 after they announced their Q1 numbers at the close of the market Thursday. The share price dropped back down to levels it was trading at in the middle of last week.

So if they beat their estimates, what happened? They may have beat their stated estimates, but they apparently didn’t meet many analysts’ “whisper” estimates. Whisper estimates, which are a tighly-guarded figures used by institutional traders, had projected Google’s EPS (earnings per share) as high as $6.91, with an average estimate of $6.75-$6.80.

Google’s actual EPS figure of $6.76 was slightly lower than expectations, prompting investors to sell, returning the stock to its previous prices. Investors had banked on a strong earnings report bolstered by renewed internet ad sales figures. Unfortunately for Google, these figures didn’t quite materialize.

“Strength in the economy and previously reported tech numbers, such as those this week from Intel, may have gotten investors overly excited about the potential for a big beat from Google,” said Clay Moran, an analyst from the Boca Raton, FL firm Benchmark Co.

Investors were also likely put off by the company’s slightly disappointing numbers in the wake of their China fiasco. Many analysts see a decrease in Chinese ad revenue as a certainty for the search giant. Youssef Squalli, an analyst with Jefferies and Co. in New York, said that, “even though Google continues to serve mainland China via its HK site, we believe this strategy is not sustainable longer term, and expect advertisers to defect to Baidu over time.”

Whether this will adversely affect the recent overall economic recovery is yet to be seen. Google will certainly be looking to impress their investors in the weeks to come and we’ll be keeping a close eye on their share price.