Google earnings underwhelm market despite strong growth

Google (GOOG) posted fourth quarter earnings after the close last night and showed big profit and sales gains as it continued to see an increase in the number of users clicking on its Internet Adwords ads. This very much supports the investment thesis in ITV that media companies will see a significant recovery in revenues in 2010 as advertisers boost investment to more normal levels.

Google’s net income rose to $1.97 billion, or $6.13 a share, in the quarter ended in December, compared with $382 million, or $1.21 a share, in the same period in 2008. Excluding special items, earnings for the quarter were $6.79 a share, compared with analyst estimates of $6.48. After falling close to 5% in after-hours trading to $550, following the earnings announcement, the stock recovered to finish the session at $582.

The stock fell initially on disappointment with the average price paid per click on a Google advertisement in the quarter. Google said the average price paid by advertisers rose 5% compared to the same period last year.The company said its paid clicks, or the number of times that users clicked on advertisements and generated revenue, rose 13% in the fourth quarter compared to the same period last year. Google had posted 14% year-over-year growth in paid clicks for its quarter ended in September.

Google’s stock has risen close to 100% since the lows in 2008 and expectations are very high. Though the results are impressive, they have underwhelmed the market which has built super charged growth into the share price. A short term trade in Google pre earnings release was initiated  but has not delivered and will be reviewed at today's open.