Rolling the Dice on Google

Cheap Calls, Huge Potential

By Bryan Bottarelli
Tuesday, October 17, 2006 3:26 PM EST
Tue, 17 Oct 2006 20:26:00 GMT

Dear Bottarelli Research Member,

Warning: The following alert is for pure speculators only. We’re going to swing for the fences, and if we hit you’ll get a tape-measure homerun. If we miss, it’ll be a slow and depressing walk back to the dugout. If you’re the conservative type, stop reading this alert right now. But if you’re willing to risk $1.60 on a potentially moon-shot play, then here’s my latest analysis onGoogle (GOOG — NASDAQ).

GOOG

This Thursday at 4:30 PM ET, Google will announce their Q3 earnings. The first thing that’s interesting about this play is that Google doesn’t issue regular guidance. Therefore, analysts polled by Thomson Financial are running somewhat blind when they publish expected earnings of $2.42 per share on $1.81 billion in revenue. I’ve seen some analysts projecting revenues of $2.65 billion, so there is a lot of room on move on this number.

Secondly, it’s been a very busy month for GOOG, one that included acquiring YouTube for $1.65 billion in stock, inking an agreement to provide search for News Corp.’s Fox Interactive Media sites (which includes MySpace.com), getting text advertising on eBay sites outside the U.S., and signing on with Viacom to distribute MTV Networks video clips over its advertiser network. All the while, GOOG has maintained their dominant #1 position for U.S. search queries, capturing 44.1% of all searches (#2 is Yahoo at 28.7%).

So here’s what I think: With all their recent deals, GOOG could very easily come out and post a strong earnings number — and then follow that up with a jaw-dropping upward earnings projection based on the maturation of all their new deals. If they paint a picture that absolutely astounds Wall Street, we could see a big-time upward move in GOOG.

Now here’s another important consideration. October equity options expire on the morning of Saturday, October 21st. GOOG announces their earnings on Thursday October 19th. This means we could play options that are so deep into the expiration cycle, we’re getting them for super-cheap.

In short, this is a one-day play based on GOOG earnings. If GOOG shoots higher, we dance in the streets. If GOOG shoots lower, we get whipsawed. Personally, I’d consider adding a small position just to see what happens. After all, I wouldn’t feel that I’m doing my job if I failed to bring such an opportunity to your attention. So if you’d like to make a big-time speculation on GOOG reporting a strong number this Thursday, then here’s the play:

PLAY: Buy the GOOG October 460 Calls (GOP JL) at or under $1.65. good for the day. Do not place a stop loss at this time, as this is an all-or-nothing trade.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From October 2006