mediabiz.blogs.cnnmoney.cnn.com/2007/11/14/google-half-trillion-dollar-company-by-2010/?source=yahoo_quote
continues to dominate Web search and expand into other areas of the online advertising market. The company now has a market value of about $206 billion. That means Google is worth more than much older tech heavyweights Cisco Systems (CSCO), Intel (INTC), IBM (IBM) and Hewlett-Packard (HPQ). What's more, Google is closing in on AT&T , which has a market value of about $243 billion. If Google were to pass Ma Bell some time soon, only one other US-based tech, telecom or media company would be worth more: Microsoft (MSFT). So will Google eventually overtake Microsoft as the most valuable tech company in the US? I figured it's a worthwhile question to ask since Microsoft and Google should go head-to-head in key markets over the next few years.
First, I'm going to assume that current share counts for the two rivals stay around current levels. In addition, I'm going to predict that Google's stock will gain 34 percent a year for the next few years since that is the current long-term growth consensus for Google's profits. At the end of 2009, Microsoft would have a market value of about $405 billion and Google's market capitalization would be roughly $370 billion. After all, I'm assuming a healthy level of growth for the next three years for a company that is already fairly big. One would think that Google, eventually, would see its growth slow due to nothing more than the law of large numbers. "A half-trillion market value might be a stretch over the next two to three years," said Todd Greenwald, an analyst with Nollenberger Capital Partners. "The stock would need to more than double from here and I don't necessarily think that will happen." Greenwald did say though that Google's stock could very well hit $1000 a share in the next few years. And that price, Google's market value would be approximately $310 billion. But other analysts said my estimates don't seem far-fetched. "That seems within the realm of reason," said Derek Brown, an analyst with Cantor Fitzgerald when I asked him about my back of the envelope $500 billion market value projection. "The growth trajectory and profit profile for Google have been extraordinary. Continued strong performance seems not just possible but likely," he added. "You have a company that is an industry leader, taking market share, investing more aggressively than its competitors, has faster growth off bigger numbers and with higher profit margins." Sandeep Aggarwal, an analyst with Oppenheimer, also said that my $500 billion target is plausible. He points out that it will be a while before the Internet search market mature and thinks that Google could wind up generating as much as $50 billion a year in revenue from search advertising at some point within the next few years.
Google Apps -- then my $500 billion estimate could prove to be low. Take that multiple and apply it to a $50 billion sales target and you get a staggering $625 billion market value. "Google could head in that direction," Aggarwal said about my $500 billion forecast. "We are talking about a strong likelihood that Google can maintain high levels of revenue growth since search is still at a very early stage of its evolution."
And if the economy drastically slows next year, as some are predicting, even the mighty Google could see its impressive growth rate dip a bit. But given how much of a lead Google has over Microsoft in the online ad race, it wouldn't surprise me one bit to see its market value pass Microsoft's sometime in the next few years.
Add a comment Who knows what's going to happen in next few years? You should learn from SEP 11 incident, don't calculate anything for more than a year. May be microsoft will come up with new technology and thrid world countries growth help him to climb up more? Posted By Sanjay Patel, Hosuton, TX : November 14, 2007 4:00 pm Dream on. Google's capitalization will head south starting around 2008-09 if not sooner. Problem with Goog is that it can not own more than 100% of the online market. They can not show continous jump in market share for ever. Posted By AA, Windsor, Ontario : November 14, 2007 3:38 pm Google has to sign 10 & 20 Year Product Placement Deals with Top 4 Hollywood Studios & have Google seen in Movies & TV Shows so in 20 Yrs time it's seen again by a New Generation of people. Second is Google needs Google Apps Deals with Vodafone,Telefonica,AT&T & China Mobile giving it 65% Share of the World's Mobiles in Major World Markets including India & China.
com Posted By Simon K , Sydney - Australia : November 14, 2007 3:19 pm Googles ad revenues are currently being stuffed by the click farms and other scams feeding off the pay-per-click ads in their "content network". Yes, it will be a while before the search advertising market is mature, and when it is, Googles revenues will be down, not up! When I finally came to my senses and canceled my "content network" advertising with Google, my costs went down 80% and quality is the same. More advertisers are going to realize this in the future... Posted By Anant, Chapel Hill, NC : November 14, 2007 2:22 pm The question is not how high can google go, but how low. Posted By Randy, Dallas TX : November 14, 2007 2:21 pm Pie in the sky is more like it. Even at $200 bln market cap to get a 10% ROE they need to make $20bln in profits. They are not even going to make that in revenue in 2008.... Google is definitely a company in the same category as microsoft in 10yrs... Unfortunately, their market cap today would give a very meagre rate of return if you paid $650 to buy Google. Assuming a $400 bln Market Cap in 2017 and discounting it to present at 10% then the market cap should be about $154 bln that is roughly a 25% discount to current market levels.... Posted By KK, Lansdowne, VA : November 14, 2007 1:36 pm I'm not sure about Google's stock price increase, but that increase for MSFT would be much better than they've seen in a very, very long time. Posted By Bill G : November 14, 2007 12:56 pm I'll go with your growth rates, but doing so means you need to start at a more reasonable p/e. that whacks about 30% of the market cap off, then start your extrapolation.
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