Shares of Yahoo! (YHOO) are getting slammed after the company met earnings numbers for Q2 but fell short in revenue both for the most recent quarter as well as full year 2005 guidance. Given that YHOO was trading at 65 times 2005 numbers before the report, making the stock priced for perfection, such a collapse isn't surprising and shows us what happens when the market's most expensive stocks don't knock the cover off the ball.

On to Google (GOOG). Google is weak also as investors surmise that Yahoo's shortfall could hamper Google's ability to beat estimates when it reports on Thursday. While this is entirely possible, I would not be surprised at all to see Google beat bottom line numbers. Why? Well, YHOO reported 13 cents for Q2, same as the prior quarter. Google reported $1.29 per share in Q1, but the estimate for Q2 is only $1.20 per share.

Google's higher growth rate, compared with Yahoo, also might allow it to show sequential growth in EPS for Q2. The highest estimate on the Street is $1.34. I think GOOG could very well report $1.35+ on Thursday, despite the weak YHOO report. Maybe they are taking share from Yahoo.

Would that even be enough to boost the stock price meaningfully? Maybe, maybe not, but I would rather be long Google than Yahoo and I doubt we'll see as much disappointment in the GOOG report as we have with YHOO. Hopefully we can see GOOG maintain the $310 level throughout the week. Given what we know right now, that might be a better case scenario than we thought as early as this morning when people were positioning for a Yahoo beat.