Modest Google Upside from Higher Adoption of Google Apps
Google’s (NASDAQ:GOOG) core search business competes with the search offerings of Yahoo (NASDAQ:YHOO), AOL (NYSE:AOL) and Microsoft (NASDAQ:MSFT), while the company’s relatively new Google Apps business is in competition primarily with Microsoft Office, Zoho and open-source productivity tools.
Trefis members have created forecasts for two key drivers of Google’s Apps business over the last week: (1) Number of Google Apps Users and (2) Percent of Paying Google Apps Users. Their forecasts suggest that the decline in adoption of Google Apps will be higher than the Trefis forecast, while the mix of paying Google Apps users will roughly in-line with our current forecast. These projections suggest a combined upside of about 1% for Google’s stock.
Google Apps accounts for only about 3% of the Trefis price estimate of $677 for Google’s stock, compared to about 73% for Google’s core search advertising business and 3% for YouTube.
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Below are charts showing recent estimates created by Trefis members for the two drivers: (1) Number of Google Apps Users and (2) Percent of Paying Google Apps Users.
1. Number of Google Apps Users
The average of forecasts for Number of Google Apps Users created by Trefis members indicated a projected increase from about 41 million in 2010 to 119 million by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from 32 million in 2010 to 89 million by the end of the Trefis forecast period. The member estimates imply an upside of about 1% to the Trefis price estimate for Google’s stock. In the past, Number of Google Apps Users has increased from 4 million in 2007 to 20 million in 2009.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of Google’s stock to Number of Google Apps Users.
Our complete analysis for Number of Google Apps Users is here.
2. Percent of Paying Google Apps Users
The average of forecasts for Percent of Paying Google Apps Users created by Trefis members indicated a projected increase from about 30% in 2010 to 39% by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from 30% in 2010 to 41% by the end of the Trefis forecast period. The member estimates imply a downside of less than 1% to the Trefis price estimate for Google’s stock. In the past, Percent of Paying Google Apps Users has increased from 10% in 2007 to 25% in 2009.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of Google’s stock to Percent of Paying Google Apps Users.