Google Soars On Q2 Results, Analyst Reactions Are Mixed

Google Inc GOOG rose more than 8% in after hours trading after the company reported its second quarter results on Thursday. Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, was impressed by the company's operating cash flow of $7 billion. "I'd say $7 billion shows they're starting to get more expense discipline, which is what everybody wanted to see," Udall told Benzinga. Global Equities Research analyst Trip Chowdhry said that while Google's EPS "was a beat," the company's revenue was "a little shy of consensus." "I think the results are mixed," Chowdhry explained. "From a cost control [perspective], it seems they will do fine. The question becomes: can they continue to grow their revenues? I think that is a question mark. I think net net it is the profitability of the company that will make a difference."

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Trading On Profitability

Chowdhry expects Google to trade on profitability growth "because that is something the company can control." "On the revenue front, it will be a challenge because the ecosystem on Google is migrating to Apple iOS," said Chowdhry. "And from a monetization point of view, today we have multiple publishers who could be attractive to advertisers." Thus, Chowdhry believes there is "work to be done" on the revenue front.

AI And Machine Learning

For the time being, Udall believes that "search is the core" of the company. In the future it could be something else entirely. "What if Google were to succeed and keep growing as an investible, how are you going to get a higher return on Google?" Udall questioned. "Google is going to have to beat everybody else at artificial intelligence and machine learning. But there's a lot of companies putting a ton of work into that. That is the core of what Google is trying to do." Udall said that a newcomer might have an easier time achieving that goal, which could be why Google acquired Boston Dynamics and other innovative enterprises. "Here's the key: The single-most important thing is really that cash flow number," Udall concluded. "And then what can they do with the cash flow?" Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.