Buying Short Term Google Calls

As we speak, I am buying some Google calls to head into the earnings. I believe the May 500 calls are an excellent deal. The premise behind the Google play is that Yahoo has always acted in inverse relationship to Google. Their loss is Google's gain. Namely, Google has a wide moat around its advertising revenue based on search. Others like Yahoo can try to imitate the model a la Panama but fact remains, Google has now become vernacular in terms of search and web portal presence. There have been some missteps along the way but it is in no way material to their growth. Their recent acquisition of Double Click speaks volumes in terms of the strategy that Google will corner the search revenue stream in the market. It still trades significantly discounted when compared to BIDU and Yahoo.

Despite the Chinese market concerns and Yen carry trade concerns, it is likely that the market will shrug this off in the short term. I believe we can breach the $500 mark. I do not know how high it can go but it certainly is undervalued at this point. Based on the last quarter's earnings report, I believe that Google should be able to post at least $3.65 in earnings. What we may also find out is that You Tube's copyright issues are vastly over blown.

When you also consider the ability of Google to monetize search, blogs, main stream news media including radio, all other competitors are playing second fiddle at this point. Microsoft is lagging behind Google and has remained silent in their efforts to combat Google.

Technically, Google is finishing up the right side of the double bottom base and has regained the position above 50 EDMA. It would depend on strong earnings to compel this stock to move higher but that can be accomplished.

We will see.