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Teacherman1 (57.70)

Will Google Lap Gold and the S&P?

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December 13, 2009 – Comments (6) | RELATED TICKERS: GOOGL

When Google had their IPO and I saw it was going at $100, I was incredulous. I just could not see how a company whose business was selling ads on a search engine could possibly be worth that much.

When it went to $200, I thought, "get out now fools", it's going to crater.

Then it went to $300, then $400, then $500, and now it is up to almost $600.

At this rate, if the economy manages to return to anything like normal, it could very realistically end up higher than Gold, and if the S&P makes a big correction, it could pass them too.

I still do not see why it is at this price. Could someone who actually owns Google enlighten me as to why you think it is worth this much, and where you see it going?

It has a trailing PE of 38 and doesn't even pay a dividend.

I know, it is getting into the "phone business", but so is everybody and his brother. 

This stock scares me because I see it as the "poster child" of an overheated market.

To each his own, and if you are bullish on it, good luck. If you are short, you are probably due for a big payday.

JMO and worth exactly what I am charging for it. 

6 Comments – Post Your Own

#1) On December 13, 2009 at 1:23 PM, rofgile (99.29) wrote:

Hi Teacherman1:

 I've been on the fence about buying GOOG for a long time.  So much so that I missed it when it was $300/share.  Perhaps $600/share is still a good deal?  

 Google is now a $170 billion company.

 GE is a $170 billion company

 Proctor-Gamble is a $180 billion company

 Gilead Science is a $50 billion company.

----

 How does Google compare to these companies?  It is not as diversified as GE and PG are, and does a search engine company really compare to the biggest industrial and consumer staples companies for price?  Is it worth three times more than a successful drug company?

 I agree with the market that it is worth more than the drug company, but comparing it to GE and PG gives me pause.  

 Google is such a different animal than most of these companies, however.  I think it is a generational change of a company.  GE and PG were the big industrials, they grew and grew - but now they are quite developed.  Next came the modern drug companies, and those are still growing.  But the next frontier is information companies.  Google is going to devour every information company for breakfast.  And my word!  The kinds of innovations they have coming out like clockwork.. 

 I wouldn't bet against Google.  I honestly wouldn't be surprised if 20 years from now Google is a 1-trillion market capital company involved in most forms of business and advertising.  That is downright scary!  

 I'm actually glad that Microsoft is competing with Google now, already that competition is making the rules more fair for Newspaper publishers.  Watching Google compete with Apple (Another 170 billion Mkt Cap) is also becoming very interesting.

 -Rof

 (*Ahem.. Gilead should be a 75 billion mkt cap though....*)

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#2) On December 13, 2009 at 1:43 PM, Teacherman1 (57.70) wrote:

rofgile

They have the market cap of GE and PG, but look at their sales and income compared to GE and PG. I assume the comment about Gilead is about where you expect them to go. Right now, they have about one fourth the market cap of Google, but their sales and earnings are far from only one fourth of Google.

I guess it is all based on the future

Good luck to anyone who is in for the ride with Google, but I am too old to wait for them to catch up to their "billing".

Thanks for the comments. 

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#3) On December 13, 2009 at 2:49 PM, RonChapmanJr (89.91) wrote:

I don't really like Google but I would not bet against them.  There are lots of "safer" organizations to bet against.

ron

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#4) On December 13, 2009 at 3:27 PM, Teacherman1 (57.70) wrote:

RonChapmanJr

Thank you for the comments.

I am not going to short them. I am not going to do anything with them.

I was just trying to understand why their share price was where it was at.

I just could not see a good reason, other than just "betting on the come".

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#5) On December 13, 2009 at 3:37 PM, mrspiffy1 (< 20) wrote:

Who cares...really? The gold trade is history. SPX hasn't worked for a decade.

http://yieldpig.blogspot.com/

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#6) On December 13, 2009 at 9:37 PM, ChrisGraley (29.63) wrote:

The big thing that gets me with Google is that managment can't seem to finish things. They have tons of great ideas and are good at getting page-views and making money off of that, but really poor at integrating all of the different mini-plans together to make money. The phone thing will be a big plus for them because they will be giving it away. (ad supported of course) You-tube was a mistake and they would have been better off buying  a TV Station and putting the content online for free. (ad supported of course.)

Most of their programs are still in perpetual beta and they have orphans like picasa and you-tube that are money losers right now. If however they can bundle this mish-mash of different projects into an integrated product through something like the Chrome OS, then the sky's the limit!

Acquisitions that could reap benefits for Google...

Sprint.- Being able to offer ad supported free cellular service using Sprint's cell towers would quickly kill off the rest of the competition. Acquiring Clearwire would be a big bonus in the smart phone arena as well.

Any television or movie content that they could find! Again, what Google would be able to make off of the ads would dwarf what the original content holders could make.

Amazon.com - Converting ad revenue to even better product revenue would be great. Getting the Kindle and books published through Amazon would just be gravy.

Any Itunes competitors. They would already get a good one with Amazon.com,  but it would be nice if they could acquire a little more TV and Movie content.

I'm not really exicited about the Chrome OS if they intend it to replace Windows, but I'm real excited about it if they intend to be the OS of choice for all those gadgets you might have. Combining it with Android will give it a 1-2 punch that will be hard to compete with. Chrome would be virtually instant on and would force processing power to the cloud to preserve battery life and  Android would allow you to take advantage of your gadgets processing power in the most effective way, allowing you to custumize it to what's important to you.

There is a lot of potential with what they are doing, but they still seem to have their "Ben and Jerry" moments. If they get it all together in one of the many different directions, they could easily be a trillion dollar market cap.

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