Google shares shot up more than 12% in after-hours trading on Thursday following the company’s report of surprisingly good second-quarter earnings. Results were far stronger than analysts expected, with both revenue and net income increasing more than 32%. Cash and marketable securities rose to more than $39 billion, compared with debt of less than $4 billion.
Google was one of the undervalued tech stocks I recommended in a column last month. My thesis was that some of the biggest and strongest tech companies – such as Applied Materials, Cisco, Google, Microsoft and Oracle – are trading like mainstream blue chips with little or no growth premium. Of course, one can’t draw any conclusions from a single unexpectedly good earnings report. But it does serve as a reminder that the valuations of these formerly high-flying tech stocks are so deflated that it takes only a little good news to move their prices significantly higher.
