Forum Moderators: goodroi
Always thought Ebay was overvalued after it shot out of the gate from the IPO but it had a nice long run. G is already expensive and getting more so by the second. Guess the question is how much more can they grow before they trip up or someone starts to eat their lunch?
I don't know squat about the stock market, but I do there's more ways to make $$ off Google besides AdSense;-)
So buy it. How can you go wrong with a 115 P/E?
So buy it.
How can you go wrong with a 115 P/E?
During the dotcom madness, Sun Microsystems traded at $64, or 10 times its annual revenues. Anybody thinking of buying Google at 25 times [annual revenues, which is different than earnings, P/E is currently 111, as of today, that's at least 5 times higher than could be considered sane or rational] should listen to Sun chief executive Scott McNealy's post-crash analysis of the stupidity of his own shareholders. In 2002, he said at an investor conference: "At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company."That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate.
"Now, having done that, would any of you like to buy my stock at $64? Do you realise how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?" The Guardian [guardian.co.uk]
Yes, $300/share. P/E ratio is over 100. Do these investors understand the discomfort among existing advertisers with AdWords? Do they think there is potential for significantly more AdWords advertisers or other sources of revenue for Google? Because I'm no professional investor, but that stock price seems high to me, and predicated on growth that it looks like Google will find difficult to achieve.
It sounds to me like u know alittle more about investing then alot of people. Your, right there's no way that google deserves the lofty valuation it currently has especially given the current discomfort amonth advertisers.
Whatever their revenue now, you can be assured that itr will be many times higher when they control the world ;-)
Stock market trading without inside information is nothing short of gambling.
Do you believe Google will perform better in the future, if so, buy. Most people seem to believe that Google will increase its revenue in the future which is why the stock appears overvalued.
What the stock market gambler has to decide is whether it can perform better than the P/E suggests or not.
Saying that a stock is bad value because its P/E is over 100 is as much nonsense as saying that any bet under evens (1/1) is bad value.
Do you believe Google will perform better in the future, if so, buy. Most people seem to believe that Google will increase its revenue in the future which is why the stock appears overvalued.
The question to me is - how long will they be able to sustain a P/E of 100+? When will the markets finally react?
Looking at their main sources of income (99% comes from advertising), I think the following statements are correct:
1) For their own services, the ability to monetize on services seems to be almost maxed out unless they launch new revolutionary services. Right now, almost every search result from a Google user carries context based ads, and they are already market leader in search. There is some growth potential, sure, but not enough. It depends also on Googles ability to get new advertisers on board. And what about new services? A web based O/S could be "it", but people are usually very very slow to adopt new technologies, so it will take some time until the fruits can beharvested.
2) For the content network, they currently keep roughly 20% of the revenues, i.e. to get the same profit (absolute) they have to serve five times the ads. That's five times the number of advertisers (or higher budgets from them) plus five times the number of publishers (or new sites from them). It appears to be quite difficult to get these folks on board, because every serious marketeer or webmaster has been exposed to AdSense in some form already. That's why G silently tolerates dubious ads (affiliates, AdSense laden ads) and sites (scrapers, "click the ads", and no-content-sites) in their program. Otherwise G can not sustain their growth rate.
July 21st will be very interesting (Googles quarterly report) in this regard. Will they be able to announce yet another record quarter?
-- M.
