Googlessons: You can’t game randomness

Well, as I’d worried might happen, the markets are not rewarding Google’s quarter and the subsequent analyst number bumps with a rally. We got the analyst notes we were looking for. This is from one of the morning notes that came across my desk about Google today:

JPM Equity Research Summary

Google : Solid 1Q Driven by Margin Upside; Reiterate OW & Raising Price Target to $730. Google posted solid 1Q12 results overall as upside to margins offset slightly light net revenues, and FX & hedging-neutral gross revenue showed only modest deceleration from 4Q11 levels. Street revenue is unlikely to change significantly coming out of 1Q earnings, but we believe Google’s increased discipline on costs and hiring will be more materially reflected on the bottom line. We expect Google shares to grind higher in the near term based on the more favorable profit outlook, and we are raising our price target to $730 based on ~14x 2013E PF EPS of $51.57. Anmuth.

But the stock is down 3% this morning. The markets themselves are also down pretty sharply despite a good night of earnings reports and a round of strong bank earnings reports this morning too. We can’t force the market to respond how we want them to, so let’s not be forcing any trades right now. Let me repeat: Do not force any trades here until we get a better “feel” for how earnings are being responded to by the markets. You can’t game randomness.

The Google calls I bought yesterday are down about 20% or so today and I’m likely to add to them at some point when the stock stabilizes a bit, as they give me a few months still to pay off and I’m as confident as ever about Google’s next couple years after working on my analysis on the stock all night. Can’t rush it though — do not force trades!

Back in a bit with my latest positions.