Is Google’s Sales Miss an Opportunity to Buy Stock?

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April 17 (Bloomberg) -- Mark Mahaney, managing director at RBC Capital, digs deeper into first-quarter results from Google, examines the strength of their business and reveals what he likes least about the company on Bloomberg Television’s “Market Makers.” Mahaney, his family and firm, do not own shares of Google.


You had a modest missed quarter on the top and bottom line.

There was some one-time costs related to some recent deals.

They announced the company called nest.

Google does a lot of acquisition so it's hard to say that -- what they do with them.

You had some unusual cost items.

Overall fundamentals were largely intact.

This is the 17th consecutive quarter of top line growth.

The search business continues to roll along easily and steadily for google.

The moats around the business remain intact.

Doesn't mean this is a great time to step in and buy?

I don't think it's necessarily a great time, it's a reasonable time to step in and buy.

It is trading at 17 times next year's earnings estimates.

It is cheaper than it has been in the past and is trading at a modest and into the market.

We think it deserves that, we think it is a 15% earnings estimate and has nice new businesses and what google glassful means in terms of search activity.

Maybe google fiber.

They've got a couple of new growth areas out there that should stabilize the growth rate over the next 3-5 years on the core business is in tact.

It's one of the hardest does this is to replicate.

It is hard to see somebody coming in and taking share away from google.

It's a decent entry point.

It is not a slamdunk for it if we need something to hate on, what don't you like?

The one thing to watch out for and people miss this -- we call it the lead market.

You think google has strong share in the u.s. but look at them in the u.k.. that account for maybe 20% of all ads spent on the u.k. they are that big of a player in the u.k. what you see is the large numbers or the fact that their market share is about as mature as it can get.

You see this fade down for a company growing well in that market for 15 years.

It is going down to 10% which is pretty good.

Very few at companies around the world cap -- that consisting the kind of growth.

This is 15% growth in the best case for google and that's probably where the rest of the business will grow.

3-5 years down the road, or one-two years?

We think it is 3-5 years down the road.

If searches affectively maturing at a slower rate, does google effectively have to make all these acquisitions?

That's a very good question.

There may be an element of that.

It's very interesting that facebook as a contrast has made acquisitions to defend its core user base.

It's instagram and the attempted by snapchat and maybe the whatsapp.

Google has never had to defend its search core business.

It has never had to buy the next disruptive search business.

It is looking to do acquisitions and that's good management strategy.

It's good growth strategy and that's what investors should want to see.

To compare that to facebook, for example, it makes sense for facebook to buy instagram because instagram is a huge threat to facebook.

Many people think it is more relevant but when google makes acquisitions, they don't need to buy google, jr?

That's the history of the last 15 years.

There has never been a really competitive -- compelling search engine for people to go to.

That's says something about their competitive moats around the business.

They have build out new ancillary revenue streams.

Some are more obvious than robotics like youtube and android and building up the mobile system they have been successful with.

Some of the newer things are a little bit odder.

I think nest is a perfect play into the google core businesses.

The robotics is more of a stretch.

Google is trying to make sure that all users around the world come onto the internet because if they do, google can monetize that.

One why they do that is facebook.

Facebook is announcing earnings next week.

The estimate says earnings will double to $.24. is that overly optimistic?

No, i think those are reasonable estimates.

There is a lot of momentum behind facebook and a lot of new advertisers still coming onto the site.

There are still two buckets of ad revenue -- video ads coming later this year and the monster -- and the monetization of instagram.

We would probably give a slight preference to google because of violation -- evaluation but we like both stocks.

You're one of the most followed voices on google, thank you for joining us.

Let's -- next to eric schmidt.

We will be talking about

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