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Google (ticker: GOOG), that peaked in last November at $747.24, has suffered from the recession fears and the doubleclick deal incredibly; their stock price lost 40% of its value in just 5 months! Besides, on April 17, they will present their earnings after market close and this could be vital for it´s future direction.

In the following chart we can see Google´s stock price evolution:

We can clearly see that Google bottomed on March (or is it a temporary bottom?), and that might be the buy signal investors were waiting for. Some believe that its current price of $455.03 is quite an attractive value for a medium term investment. In this post we will study the company and make our unbiased recommendation. Let´s have a company overview before beginning the analysis.

GOOG was founded in 1998 and quickly became a top search engine via word of mouth. They decided to go public on August 18, 2004 at $85 a share. The company generates over 98% of its revenue from online search advertising and is the industry leader in this form. Their mission is to enable web users to find the world´s information on the Internet.

The problem that Google is actually facing is a decrease in it´s paid click growth;  they have fallen in three consecutive months. But this will be compensated with a greater pay per click, according to Merrill Lynch. “If Google can add one $0.60 click as a replacement for fout $0.20 clicks, the impact will be favourable”.

Another risk for Google are revenue pressure from competitive initiatives by Yahoo and Microsoft, but over the last weeks this fear has almost dissapeared.

On the other hand, closing the DoubleClick deal has better positioned Google, since it could generate approximately $300 millions in revenue in 2008. The truth is that this tech leader stock will expand in the future since internet is growing year by year exponencially, and Google´s creativity is amazing.

Their cash position is excesive; $16 billion between cash and short term investments and they have literally no debt.

Their increasing sales and awesome operation margins show that their indicators are very attractive. The PER ratio equals 23.5, that is an adequate figure for one of the most promising growth stock.

In fact, the PEG ratio (PER over growth) is smaller than one, that indicated that it is a cheap stock when we compare the price with the expected growth.

To resume, Google is very attractive, but they have dissapointed investors in two of the last three quarter earning announcements. Nevertheless, Merrill Lynch´s analysts expect GOOG yo upbeat predictions, and they have a buy recommendation and a one year price objective of $590.

Although its momentum for this stock isn´t the most convenient, most analyst would agree that in two years time Google can double very easily. The entry price could be tomorrow, if you have faith that they will report accordingly with expectations. If not, if you are a recession believer and think that the market will find new bottoms, then indoubtly you should wait al least three months.

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