Blodget: Does anyone really know how much GOOG is worth?
In the wake of Google Inc.'s (NASDAQ:GOOG) earnings announcement last week, all the analysts who follow GOOG (which opened at $467 this morning) have tweaked their speadsheets and come up with revised, 12-month price targets. According to Henry Blodget, Slate's star analyst-turned-columnist, these targets range from $415 to $650, and none of them is worth a grain of salt.
Blodget has a piece in Slate today about the myriad problems with price targets. Blodget has been highly critical of the securities industry since he was banned for life, and you can see where he's coming from. After all, he knows how the sausage is made, and also how suspect price targets are because of their inherent paradox. Any investment professional will tell you that past performance is no guarantee of future results, but the metrics used to predict a price target (or future results) are all based on past performance. And since each metric is not much more than an educated guess, a price target is not much more than a composite guess based on guesswork. It's like a photocopy of a photocopy -- after a while, you start to lose resolution.
If you want to buy into GOOG, do it because it's a juggernaut, a core holding for anyone who wants a long-term investment in the future of the internet. Not because someone thinks it will be at a certain price at a certain time. Especially since, given GOOG's volatility over the past year, odds are that $650 price target will be revised many times before 12 months is over.
Blodget has a piece in Slate today about the myriad problems with price targets. Blodget has been highly critical of the securities industry since he was banned for life, and you can see where he's coming from. After all, he knows how the sausage is made, and also how suspect price targets are because of their inherent paradox. Any investment professional will tell you that past performance is no guarantee of future results, but the metrics used to predict a price target (or future results) are all based on past performance. And since each metric is not much more than an educated guess, a price target is not much more than a composite guess based on guesswork. It's like a photocopy of a photocopy -- after a while, you start to lose resolution.
If you want to buy into GOOG, do it because it's a juggernaut, a core holding for anyone who wants a long-term investment in the future of the internet. Not because someone thinks it will be at a certain price at a certain time. Especially since, given GOOG's volatility over the past year, odds are that $650 price target will be revised many times before 12 months is over.











Reader Comments (Page 1 of 1)
2-06-2007 @ 4:06PM
Sheldon L said...
I know what GOOG is worth...less tomorrow than it is today!
2-06-2007 @ 8:02PM
beanspants said...
Any investment professional will tell you that past performance is no guarantee of future results, but the metrics used to predict a price target (or future results) are all based on past performance.
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This doesn't really apply when doing the estimations for future returns from a fundamental value analysis perspective.
I mean, are you really saying that you can't predict R&D or debt expense within 10% from year to year?
And the point Blodgett makes is that estimating future value based on past performance isn't of value, but that's completely ignoring the other 50% of the work done creating that estimate -- it's like saying you could have figured out Einstein's Theory of Relativity because you can work out the equation if the numbers are given to you.
Basically, Blodgett is a hack and a slimeball, and is sad he's getting paid to do such work.