Google, Inc. (GOOG) in Long-Term Breakout

Google, Inc. (GOOG) made headlines last week as one of the first companies to report Q1 earnings. Although the results came in ahead of the consensus estimate, shares sold off on the news and dropped back to the $600 level.

That’s a bit of a setback for the Google faithful, but bigger picture, the company’s share price is currently locked into a multi-year pennant formation, something that frequently leads to an upside breakout.

Take a look at the chart below. As you can see, GOOG has tested this area between $625 and $650 a number of times over the last two years. But not once have shares been able to break through for a new all-time high above $700.

Earnings

While that’s the bad news, the good news it hat Google has never had this much earnings power. The company is expected to make $37 a share this year. While a forward P/E of 16X doesn’t exactly scream value, keep in mind, this is the leading Internet search company in the world, with analysts looking for 19% earnings growth in 2013.

So as shares continue to linger in this key area, the valuation picture continues to sweeten. That a lot like what we saw from Apple, where earnings kept climbing while shares were trapped between $400 and $425.

The Take Away

Google continues to pressure the key area between $625 and $650. Although shares have yet to breakthrough, strong earnings growth and a bullish formation on the chart are leading signals.

5-Year Chart

 Author:

Michael Vodicka is the president and founder of the Vodicka Group, Inc., a Registered Investment  Advisor  (RIA). He specialized in trading fixed-income derivatives at the Chicago Board of  Trade before  spending five years managing equity portfolios for a private investment research company.

Michael graduated from the University of Kansas with a degree in business communications and is registered with the State of Illinois and the SEC (Securities and Exchange Commission) as a Licensed Investment Advisor (Series 65).

ABOUT THE AUTHOR

Michael Vodicka

Michael Vodicka is the president and founder of the Vodicka Group Inc., a licensed investment advisor (Series 65) and a financial journalist.