We’ve received several questions in the past week asking for our thoughts on Google. The company’s developers conference (Google I/O 2014) kicks off today (CNBC’s live blog of the event is here). The options market is pricing in a little bit more movement than usual (weekly implied vol is 22.5 vs. 17.5 in next week’s expiration options), though no major announcement is expected.
GOOG is only up 3% so far in 2014 as most of the price action has been back and forth. However, the stock remains in a long-term uptrend and held above its 200 day moving average on the March/April selloff in the tech space:
The 200 day ma is now around $540, and that is a crucial support level given the bounces that have occurred off of the 200 day ma over the past 2 years. The 50 day ma has flattened out, and is now around $550. On the upside the all-time high is $615.
In the shorter-term, zooming in to the 6 month chart, the majority of the volume in GOOG in 2014 has occurred between $540 and $595:
In the short run, GOOG still looks to be in the midst of consolidating its 2 year, 100% gain. The next earnings event in mid-July is likely to be key in catalyzing either a resumption of the long-term trend, or continued consolidation/possible break of the long-term uptrend.
Moreover, analyst expectations are quite high for the July earnings release, with consensus expecting 31% year-over-year EPS growth, which would be best yoy growth rate since 2011. Granted, the 2nd quarter report last year was weak, so the comparison is easier this year, but expectations are high for GOOG for the second half of 2014 as well, at around 25% yoy EPS growth.
Highlighting the importance of that July release, options traders are pricing in a large move on the mid-July earnings report. While most stocks in this market have implied volatility readings near multiyear lows, GOOG’s 30 day implied volatility looks likely to rise to near 2 year highs by the time mid-July comes around:
Clearly, the July quarter is the key for Google stock’s next move, especially since GOOG is trading near the unchanged mark on the year. We don’t have a strong view on this name in either direction, but if you’re planning on a trade longer than a few weeks, it’s a bet on GOOG’s second quarter report more than anything else.