Google Misses - Market to Drop Tomorrow

Look for a stock decline in trading tomorrow. It's almost guaranteed now that Google has missed analysts expectations for the second quarter:

"The Mountain View, Calif., Net giant made $3.56 a share on a non-GAAP basis. Net revenue, excluding the money Google shares with its advertising partners, was $2.72 billion."

"Analysts surveyed by Thomson Financial were looking for a $3.59-a-share profit on net revenue of $2.68 billion."

So there you have it. Revenue was up, profit was down. Google needs to retain that level of revenue while wrangling in costs. I expect Wall Street to overreact as they have in the past:

Indeed, bulls might well note that previous profit disappointments have provided good buying opportunities. When Google last missed a quarter back in January 2006, shares tumbled into the $370s in a 15% after-hours selloff.

I have learned a valuable lesson and hopefully, by observing me, you have too. Flip flopping on stocks (the way I did on Google) is generally not a good idea.

This should lead to a precipitous drop tomorrow among all stocks, or even act as a catalyst in bringing about the market correction. I haven't decided if I should close the recommendation or persist. I'll update this post later today with a recommendation on Google.

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Update 7/19/07 7:28 PM: Last I checked, Google was down seven percent in after hours trading. Since there are plenty of investors who don't have access to after hour trading networks, I think the stock will decline further tomorrow. Sell at the opening bell. To be fair, I will close my recommendation at the price that the stock opens with tomorrow.

Update 7/20/07 7:08 PM: Google opened at $511.90.