Google, Inc. (GOOG)

wrobbie (27.89) Submitted: 12/5/2008 5:48:40 PM : Start Price: $290.58 GOOG Score: -76.31

Long-term, GOOG is a sure winner in my view. But I believe that the next few months hold peril. The kind of ROI-driven advertising that GOOG offers will be the last thing that will be cut in a downturn - but it will be cut. For this reason I believe they'll have very respectable earnings in Q4 - particularly compared to others in their space. This will likely spread a sense that "GOOG is different" - as indeed it is to some extent, leading to raised expectations & perhaps a false sense of security. But GOOG is not *so* different that its business will be unaffected next year, as the downturn truly begins to sink in. Smart, solvent companies that can spend $1 on GOOG advertising and get $1.02 back in margin will continue to soak up all the performing advertising that they can. But as all manner of buyers (consumers & B2B buyers alike use GOOG to aid countless buying decisions) start pulling back, the price that can rationally be spent for given keywords will inevitably start to drop. Meanwhile some players (e.g. startups buying up traffic to spur growth) will vanish from the scene altogether. The result, I believe, will be surprisingly disappointing earnings in Q1 or Q2 - this after Q3 & Q4 of this year have set unsustainable expectations. The ensuing surprise & disappointment could result in a really serious market correction - I won''t be at all surprised to see the price start with a "1". But when that happens - load the boats. Because GOOG really IS different - and just as its type of advertising is the last thing that will be cut, it will be the first thing that will be restarted as the economy regathers its wits. I could see this stock quadrupling or better in relatively short order after things turn around ... but while I'm confident that it will see $400 again, I'm equally confident that it will see $200 and less before that.