The quote I used in the title is from 'Andy' commenting on yesterday's post GOOG, Cramer and the Up-Down-Up Dow - WOW! in which I point out that with all the hype GOOG has gone nowhere, ending the year close to where it began.
Yes, you could hurt your neck watching the stock price of Google Inc. (NASDAQ:GOOG) go up and down as dramatically and as often as it has. But in the end, almost anything was a better investment this year.
It seems that each time I raise the question about GOOG's valuation I am told, "You just don't get it." Since I'm still scratching my head about Google, I now believe this statement must be true: I just do not get it.
Why do people fantasize about this stock being the largest public company, based on capitalization, in the world? Why do they think the downside risk is worth it? Why do they think that this company's technology is the last stop in an ever-changing internet world, and that it will rule forever, even though this is being proved wrong every few months?
At one point James Cramer arrived at his price target of $560 (before going wild) by using an earnings figure of $14 and a P/E of 40. I think that as the stock increases in price and growth slows down people will be less willing to pay a P/E of 40 next year. Using Cramer's anticipated earnings of $14 per share and a multiple of 35 gets you to $490 per share. That seems more reasonable to me but it does not take it much beyond where it is today. In the interim it will fluctuate.
Here is another comment from someone who thinks I just don't get it:
"For once you aren't bashing Google but I guess you can't since you know it's going to go way pasty its high of 513 and you know you'll just have to eat your words. Funny how you don't come around when Google is doing good only when it's down." (sic)
These type of comments are frequent. Why I'm commenting on the comments is that a I really would like to "get it." I really would like to learn. I really would like someone to point out why this company? But they don't. They only tell me I'll be sorry.
Well if you bought GOOG last January you should be sorry because so far you made no money and would have been better in an index fund. And if GOOG goes to 600 by next year and you make 33% over a two year period...so what? That is not enough based on the risk. At it's high of $513 it was up less than the DJIA or S&P 500 for the year. Sure it came back from its bottom but why tout a stock that races up and down so much?
Did we learn nothing from the dot.bomb fallout six years ago?
I'm sure there are many people reading this blog who have something to offer and I would like to learn from them. But those who offer only opinions with no reasoning to back them up really offer nothing.
To these boosters I retort: Google is NOT a revolution. It is just a company.
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Reader Comments (Page 1 of 1)
12-21-2006 @ 4:17PM
Andy said...
Just think of the forward thinking of Google.Who else as a partner like NASA? Just think of the possibilies there. Their organizational structure is brilliant and retains the creativity of their engineers even as they grow. They are not like the dotcoms-they have earnings.
12-21-2006 @ 4:26PM
Andy said...
I do think they are a revolution. Who else was forward thinking enough to get a partnership with NASA. I have been watching their moves and some of this stuff is leading in directions that nobody else is contemplating. The internet is the new printing press and Google is Gutenberg.
12-21-2006 @ 5:08PM
Akin said...
I do agreed with you, however, It depends on what the "CEO" of Google is thinking. For example, if the CEO of the company is thinking of the shareholders bottom line,yes, sky is the limit for Google'stock price, if not the stock is not going anywhere.
For example, look at Microsoft stock for the past two years sitting on $25 - $28 a share, look what happen after the product hit the market, it goes to $30 a share. Also, shareholders are receiving dividends they really have nothing to loose, but to gain. That is it....
What you also have to remember is that if google have some research and development of new inovation going on that you do not know about, you cannot make judgement. Those who bought Google;s IPO at $100 a share they are laughing. It depends where you enter the game.
It is all about new inovation. For any company's stock sky is the limit, it all depends on who is managing the company.
That is my take on that.
12-21-2006 @ 6:36PM
t said...
My google has gone AT&T while the getting is good. Ma Bell is out of the rocking chair and about to drop the advertising smack down on Google. Google is amazing, but who is going to own all of the pathways to the internet reaching every human on earth? Yep, AT&T..."your World Delivered" better jump on...
12-21-2006 @ 6:59PM
michael said...
totally agree that GOOG is over-valued, I'd say by 50%.. that 14 EPS is nuts, still trying to figure out where Cramer came up with that one. Has any company ever had 300% anual earnings for any extended period of time... ugh, and AT&T getting into internet advertising, please.. that's not even their space.. another crack smoker. Google owns the online ad space, for now, Yahoo tried with Overture, failed.. it'll take a another brialliant start-up to displace Google, but it still doesn't warrent these nutty valuations.
12-22-2006 @ 4:07AM
stocktube said...
in equity market, there's a thin line between over-price and under-price ... if more investors think google has potential and willing to pay higher price than the sellers, the price will go up and vice-versa - basic demand & supply 101 ...
investors from the buffett-type will not touch google but the other type of investors will simple love google as the volatility presents the best opportunity to make tons of money ...
imagine you can long and short google multiple times per-month because of the volatility - awesome profits ...
one's meat may be another's poison ... so it's not fair to say you can't make profit from google - it depends on your strategy & method of investing ...
cheers