Google, Inc. (NASDAQ: GOOG) is all the talk of the financial community. Everyone was impressed and the calls were endless. It seemed worthwhile to update a consensus target price after the spectacular report that has almost everyone cheering the stock.
Out of the 10 reports I picked through, almost all were positive. From these ten reports, the new consensus price target on Google shares is now $552. The Street's target will actually be a little different than that. In fact, the actual Street consensus target price may be a bit lower because many analysts will not officially change the price target, while others yet do not have formal price targets. As you can see from the firm names below, these aren't just the boutique calls.
- Jim Cramer on MAD MONEY was the first pundit to come out in favor of the stock; he even had "GOOG" written in a black marker across his forehead. Cramer's math for the new price target is simple: $14.00 in 2007 earnings and a 40 P/E multiple. This takes him from his $500 target up to $560.
- Citigroup put its target at $600.
- Goldman Sachs raised its target from $525 to $595.
- Jefferies raised its target to $520.
- Merrill Lynch now has a $530 target.
- Oppenheimer has a $540 target.
- Pacific Crest maintained its $500 target.
- Piper Jaffray maintained an Outperform and $600 target.
- RBC Capital maintained its outperform rating, but lifted the target to $525.
- ThinkEquity has a $550 target.
- Soleil was one of the few who didn't have the pom-poms out, because they noted the stock is priced to perfection and maintained a Hold rating.
I'm asking how much better-than-expectations the company would have to post earnings. As it is, everyone was so positive on GOOG ahead of the results. But GOOG did what it needed to and then some.
As a reminder ,today is options expiration. There were 73,000 of the closest call options and 100,000 of the remaining active put contracts that were still in the October open interest today (as of yesterday's close). In truth, many or most may pair off and most will just expire worthless; so it doesn't mean that you will get 17 million shares whipping around from options alone.
It should also be noted that most of the open-ended mutual funds have an October year-end, and many traders are betting that there will be continued fund buying with the company being a MUST OWN. There are still funds that didn't own Google stock and many will want to show it on the books for the annual report.
Google is up some 7% today to around $456. Its year high is $475.11.
Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers.
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Reader Comments (Page 1 of 1)
10-22-2006 @ 9:32AM
sufiy said...
Lets keep all media hype away and quick short covering amusement following it and check out Google's development in recent Q in order to try to understand its valuation compare to its piers. Upside now is known and everybody is on Buy side with price target 600 (+30%). Shorts are killed and short ratio is less than one day trade, no easy money for upside after yestoday short covering left, somebody has to start to buy into this story at this 460 level. First Google came with Rev 2.69 billion which is less then 2.76 which I have projected from PWC predictions of 16-18 billion online ads market in 2006 with Google Share of 40.5% of this market in Q3 (seasonal trend applied) So, first Google did not manage to increase its market share in Q3. Second, lets look at earnings GAAP ($) Q1 1.95, Q2 2.33 (+19%), Q3 2.36 (+1.3%!?) Earnings growth dramatically slowed. Third, revenues: Q1 2.25, Q2 2.46 (+9.3%), Q3 2.69 (+9.3%!?) math's precision or can I smell some cooking oil here? 44% of revenue is coming from international business. All hitfarms are located in pure "international "destinations India, China, Malaysia, Russia etc. Revenue growth is slowing with increased risk of cutting back on advertisement due to economy slowdown and click fraud awareness buy the customers. Fourth, Net cash from operations Q1 0.825 (37% of Rev), Q2 0.841 (+2% 34% of Rev), Q3 1.0 (+19% 37% of Rev) Capex Q2 0.699 (0.319 Real eastate 0.380 "normalised"), Q3 0.492 (+29%!) So Google Capex increase is really much bigger then their Rev growth 29% vs 9.3% with constant Net cash from operations at 37% Rev, Free Cash Flow is under compression. Total Free Cash Flow for nine months is 1.112. If we will project Rev growth for Google at 12% for Q4 vs 9.3% for Q3 they will make Rev Q4 3.0 (less then based on PWC and 41% of market 3.2) Net cash from operations at 37% of Rev 3.0 will be 1.1, if we apply 20% growth for NCFO in Q4 (vs +19% Q3) we will get 1.2 so lets assume NCFO will be in the middle = 1.15. What about Capex? I think it will be increasing dramatically with moving into video: broadband, storage, new blades, electricity. But if we even aply same growth to capex as to Rev +12% (they said it will be bigger then Rev growth, Q3 was +29%) Capex Q4 will be 0.551. So, Free Cash Flow in Q4 will be NCFO-CAPEX=0.6 and total FCF 2006 will be 1.712 If stock will not move from 460 we have MC=142 billion MC/FCF=83! YHOO is projecting FCF 1.35 in 2006 (lowered recently) with MC at 32 their ratio is MC/FCF=24 If the Google will manage to make even 2.8 EPS in Q4 (+19%) (do not forget annual charge for all those "to be expenced option related expences which they did not account in past Qs) GAAP 2006 will be 9.44. So with GOOG at 460 we have company with 2006 est MC/FCF=83, P/E=48.7, P/S=14.2 with slowing growth in EPS and Revenue and most important with dramatic compression in FCF. YouTube will bring dilution, much more CAPEX in Video Game and No revenue so far. What is the more reasonable valuation of Google: if we give GOOG MC/FCF=40 (69% over YHOO for leadership and "strength") MC with 1.712 FCF must be 68.5 billion with 310 million shares outstanding before YouTube diluton it is...221 share price. When MR Market will figure it out I do not know, but I am testing the water with March 2007 460 puts.
http://sufiy.blogspot.com/
10-23-2006 @ 6:15PM
Howard said...
where is the split and when???????????