The latest weekly report from HitWise shows Google Inc. (NASDAQ:GOOG) with over 60% of the US search market. Thirty-eight of the analysts who cover Google have a buy rating or better on the stock. But, according to Bear Stearns, Google's hyper-growth is slowing. Search queries were up 29% in March, but a year ago, that number was 50%.
In the face of all this data, The Wall Street Journal wonders whether investors are putting their expectations for Google earnings, which are going to be released today, too high.
Probably not.
Google still has to earn its tremendous valuation. The company's shares trade at almost 14 times trailing revenue. For Yahoo! Inc.(NASDAQ:YHOO), that number is less than 6x. At eBay Inc. (NASDAQ:EBAY), the figure is about 8x.
None of this is to say that Yahoo! and eBay are not fairly valued. But Google carries a premium of almost 100% when market cap to sales is the measurement. It has to keep growing at the anticipated rate of about 70% year-over-year to keep that premium.
So, when Google reports earnings, expectations will be too high. But, they should be. Google has managed to beat "too high" before.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
4-19-2007 @ 11:05AM
Ken said...
What are you trying to say? Your post is illogical, lacks coherence and is internally contradictive. Try again.
6-05-2007 @ 2:38AM
Aine said...
Hate to say it, but... Agreed. (With comment 1)
4-23-2007 @ 9:57AM
Steve said...
Google has put themselves in this situation amazing results are now the expectation.
Google has more upside, with international momentum. With Yahoo achieving more success and exposure in Europe and Asia due to it's time in the market place... Google's growth will be discovered more and more in these markets.
Youtube is the first step, with 70% of its audience international. If they do this... expect the amazing results to continue.
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