Google Inc. (NASDAQ: GOOG) had net income of $721 million last quarter, its best quarter of the last four. eBay Inc,'s (NASDAQ: EBAY) best quarterly number over that same period was $279 million. Of course, the holidays make eBay's business more seasonal. Yahoo! Inc.'s (NASDAQ: YHOO) best quarter net income of the last four was $632 million. And Amazon.com Inc's (NASDAQ: AMZN) best number was $199 million.
Google's market cap is about $124 billion now. Yahoo!'s runs about $35 billion. eBay weighs in at $40 billion. Amazon at $13 billion. So, Google is worth 41% more than the other three combined.
Of course, Google's revenue almost doubled last year, to $6.1 billion. Over at Yahoo!, revenue has not doubled since 2004, when it was up 120%. eBay almost doubled revenue in 2003, and came close again in 2004. Amazon has not grown that fast since 2000.
Obviously, Google gets a huge market premium for its recent spectacular growth compared to the rest of the companies. Based primarily on anticipation of future increases in revenue and operating income, Google trades at about 15 times sales, while Yahoo! trades at 5.7 times and Amazon only at 1.5 times (but their big growth year was six years ago).
Virtually all of Google's revenue comes from keyword advertising. Internet advertising has been growing at an extremely rapid rate, but a recent study from the Internet Advertising Bureau says it is slowing. While U.S. Internet advertising was up 37% in the first half of 2006 compared to the same period in 2005, it only grew by 5.5% from Q1 2006 to Q2.
Predicting whether Internet ad revenue growth will continue to slow is impossible. Obviously, Yahoo! has suffered recently from the perception that some of its major ad categories are not doing well. It is too early to tell whether this will spill over into other Internet companies.
One thing is certain. When Wall St. gets a whiff of slower growth, stock prices stumble. Yahoo! is a case in point. This year Yahoo!'s share price has gone from over $43 to $25. In late 2004, eBay traded at over $58 when today, it changes hands at $26.
Google's day is coming. In the June quarter, revenue jumped to $2.456 billion from $1.385 billion in the same quarter a year ago. Another double. But, with overall web ad revenue growing at less than 40%, Google is too big to gain enough market share to overcome the overall trend.
And, when the trend is not your friend, eBay and Yahoo! would indicate that a company's market cap can fall by half.
Douglas McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
9-29-2006 @ 11:36AM
Ann lambert said...
Simply: Google 300 plus million shares being chased by 30 million would be share holders.
Demand outweighs supply.
not bad for the google boys
9-29-2006 @ 11:47AM
Mike - Chase College of Law said...
If Ebay goes down, GOOG migt well become a $200 stock.
10-04-2006 @ 7:50PM
eBay forum Girl said...
If Google drops to $200 or less I think the second web bubble burst is going to happen. Google makes money though, so they are worth some money, they are as close to the next "microsoft" type of compnay this generation is going to see for awhile.