Just last week I was writing “Is Google Set to Become the World’s First Trillion Dollar Market Cap Company?” and realized that in all likelihood, it would not, if a) history and b) the company’s growth was any indication. For a) read this. I am in the process of writing Why Google [The Stock] Scares Me, that will answer b).
Anyway, today Barron’s comes out and basically says: “get off the bandwagon, Google is poised to fall.” I would criticize this kind of analysis, but I recall Barron’s calling for Sandisk to fall by 50% and it did just that. For my experiences in shorting a stock, read this.
While there is no way to really know the future performance of a stock price, it is worth noting that:
Barron’s said Google is overvalued because it trades at 37 times next year’s expected earnings and because its growth rate is slowing. It also noted that Google now has the 15th largest market capitalization among U.S.-traded shares, and its price-to-earnings ratio is two to three times higher that of similarly sized companies.
(…)
Spending on research and development, sales and marketing and general and administrative expenses are all expected to outpace revenue growth this year, Barron’s said.
For what’s it worth, previous high flying stock like eBay, AMZN, YHOO, CSCO, Dell, MSFT have all come back down to earth.
Anyway, check out for my Why Google [The Stock] Scares Me post later this week.
Disclaimer: I own YHOO.
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