Google had a big day on Friday, July 17th. The stock exploded by over 16 percent for a $93.08 gain, bringing the stock up to a little over $672 per share. There were obviously a lot of factors that came together to cause this to happen, and looking at what they were can help us to see if the same criteria can be applied to other stocks in order to help us predict these types of gains before they happen. For short term traders and binary options traders, this is an important concept to learn. Not all assets are the same, but some do share similar circumstances and looking at what works for one might be able to be applied to another.
First, realize that Google is a high profile stock. It has a huge amount of volume each day with a market cap of 459.21 billion.
If you look at a smaller (yet still huge) company like Microsoft, the market cap is only at 378.23 billion. In other words, Google is big. When a big swing happens, there is more potential for the price to move fast just because so many more shares are bought and sold. Next, remember that Google is expensive. Shares have typically been around $500 lately. Microsoft is only at $46 right now. Big dollar changes are easier to accomplish. A $40 move for Google would have been less than 10 percent. It would have been almost 100 percent for Microsoft. For this reason, looking at percentage changes are more accurate, but many traders cannot apply this concept to their own psychology.
The next thing is to look at news items pertaining to Google. They have recently hired a new CFO. Ruth Porat was hired earlier this year to the tune of $70 million, which seemed like a huge investment and risk at the time. However, she has done a lot to revamp the company’s image, and it is beginning to pay off. They have slowed down their hiring, which is saving the company money, and implying that employee retention is not as big of an issue for the company–something that promotes stability and confidence in their products. In 2014, they increased their number of employees by 2,435 people per quarter. The first quarter of 2015 saw an increase by 1,819 employees. It’s a huge difference, and over the course of a year, it equals about 2,500 fewer jobs. That’s a ton of money saved right there, and as long as products do not show a sign of lesser quality or more scarce availability, it will only benefit the company over both the short and long term.
Porat has said that she won’t be trying to cut employees at all, but that she will be redirecting expenditures. In fact, estimates say that employee hiring has gone back up again and expenses are increasing for the second quarter of 2015. Still, the fact that spending is being addressed with so much attention being paid to it gives the company some public accountability in this area. If there is a failure, it will be a very public one. So far, things have shown that they can turn around. This is part of the reason why the stock price shot up. More or less, she is the face of responsibility. As one expert put it, she’s “the grownup in the room.”
Being a Friday didn’t hurt, either. Stocks tend to jump at the end of the week, and this was to Google’s advantage.
Finally, Thursday afternoon was when their earnings call took place. Earnings stated that growth for the year was at 11 percent–so far. In this light, a 16 percent bump in price, while very sudden, is to be expected.
These factors combined created a great situation. Traders need to pay attention to earnings especially and when they are announced, get ready to act. If there are other benefits going for the company, the stock should rise steadily throughout the day.