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| 5/24 |
| 2008/10/16-20 [Computer/Companies/Google, Industry/SiliconValley] UID:51543 Activity:moderate |
10/16 Google demolishes analyst estimates. Still holds $14B in cash.
Is almost certainly in better shape than the broad market going
forward. -tom
\_ not bad. considering advancers vs. decliners on NYSE was something
like 600 up vs. 2,900 down on a +400 DJIA up day.
like 600 up vs. 2,900 down on a +400 DJIA day.
\_ Are you sure about that? Because everything I own, except for
a few financials, is in the green.
\_ ob great job?
\_ sorry, that site was probably not updating fast enough.
final: 55% advancers to 44% decliners.
\_ So, when is it going back to 700? When is a good time to buy/sell?
\_ if you are looking at a 15+-year timespan, GOOG is probably okay
to buy now as a "growth" part of your portfolio. -!tom
\_ My goal is to buy stocks which are likely to double in the next
5 years. I am confident that GOOG will do that from current
levels, barring a major economic meltdown in the US. -tom
\_ If it doubles it won't even be at its high for the year
so that's not saying much.
\_ if you hadn't noticed, the entire market is down.
\_ And? Point being that doubling from here isn't
exactly hard to do. Almost everything has a good
chance of doubling from here as valuations are
so low right now.
\_ You think so? I think the market is pretty unlikely
to go up for at least the next year and probably
longer than that. Do you think the Dow will be at
18K five years from now? Nasdaq 3500? -tom
\_ Not improbable given that it was at 14K just
within the year.
\_ This puts GOOG P/E at about the right level then.
\_ The right level for what?
\_ For me to buy. I prefer to buy stocks that have a PEG of
1 or less. Since GOOG's growth rate is 26%, and it's P/E
is 23, it is valued about "right".
\_ Growth rate is about 15% going forward from what I've
read. 15% is the company's own internal target. They
may exceed that, but that's gravy. Don't count on 26%
every year going forward.
\_ Where did you read that? I would be amazed if GOOG
published their own internal growth rate targets.
\_ It's a "whisper" number. It's not published.
I read it in an article, but I don't recall
where. Here's one (not the one I read):
http://tinyurl.com/4vidbp
\_ This was make or break for GOOG. If they missed the stock was
going under $300. I was going to buy if that was the case, but
not sure now. So what are they doing with all this money that
they make, anyway? They don't pay a dividend and their margins
are high. Having $14B in the bank isn't necessarily a good
thing. No business ideas at all?!
\_ I guess you should short MSFT, too, they have $43B in the bank.
Google has a ton of business ideas, what rock are you living
under? -tom
\_ I didn't say I would short GOOG, just that having a lot
of cash could mean they are out of ideas. MSFT found
itself in the same situation if you recall and ended up
paying the money out to shareholders, which was a sure sign
they were out of blammo ideas. In case you haven't
noticed, MSFT has traded flat for 7 years now.
\_ They have search. Gmail isn't making money. Neither is
YouTube. What other products do they have? -op
\_ As I have said on the motd many, many times, the fastest
growing part of their company, which is very profitable,
is an ad delivery network called AdSense. This is not
"search". Did you miss this the other three or four times
we had this dicussion? -!Tom
\_ Google Docs and the Android are two obvious examples of
major new products. Not all products have to make
money on their own, if they bring people into the core
business. -tom
\_ Badly MS immitation Google Docs bring people to
search? Really? I didn't know that. Amazing!
\_ Have you even used Google Docs? It's not an
imitation of MS Office, it's a completely
different paradigm for collaborating. The
applications still need some work, but the
paradigm is much, much better than the document-
centric paradigm. That's why all kinds of people
are using it. But anyway, you believe what you
want to believe; there's no incentive for me
to convince you to be less of an idiot. -tom
\_ you still didn't answer me how their superior
product will pull in more revenues when they're
free for starters. And a superior product rarely
means superior revenue. Look at Winblows and
the revenue M$ generates. |
| 5/24 |
|
| tinyurl.com/4vidbp -> www.alleyinsider.com/2008/9/google-breaks-400-and-still-not-cheap Google is therefore trading at about 27X current free cash flow. This multiple is still on the high side, but it is far more reasonable than Google's valuation than anytime in the last few years. As we've argued previously, we think a fair multiple for Google is about 20X-25X ($300-$375), and we're finally close to that range. It means Google's stock is finally getting to the level where there should be good downside valuation support. If the company's business really falls apart, the stock could drop below $300, but we don't see that happening. In part because stock multiples are compressing across the market. And, more importantly, because we think the Street's estimates for 2009 revenue growth are significantly too high. We have heard that Google's internal targets for 2009 call for about 15% revenue growth. Wall Street still expects a lot from Google, and we can't see the stock resuming a sustainable upward course until expectations are once again low enough that the company can beat them. Over the next few quarters, as the global economy weakens, we think analysts will gradually reduce their revenue estimates for Google in 2009. We expect the stock will continue to tread water (or worse) until they're done. If the stock falls into the $200s, this would finally translate to a compelling 10-year return). You need to see market action and how the stock GOOG was trading. It had a rising bear flag in a downward channel and finally something did it in.. COMP and NDX both broke records and major support areas and that means GOOG, AAPL , RIMM are in death spirals. I think that Henry is being pretty conservative here - but his numbers stack up based on his assumptions. The URL is an interactive DCF valuation - you can change any assumptions you like. here is the problem: 1 limited growth in search advertising, given their share, current pricing (victim of their own success). So, in addition to the inherent limitations due to 1, there is a huge value destruction potential that gets reflected on the use of balance sheet cash (bad M&A) and on the operating margins of the company (bad management of expenses and costs). So, 15x is a much more realistic multiple, if you were to ask me. The stock price with that multiple is left to the reader as homework. Also, 20-25x would translate into price range of 325-398 not 300-375. Not saying google is undervalued but hate to see inaccuracy/inconsistency everywhere especially when it comes to crunching values. All we were doing was putting some numbers into a DCF using Henry's broad assumptions of $GOOG revenue growth (with some assumptions from us as well). We are interested in the intrinsic value of a stock and wanted to check Henry's broad valuation by putting some numbers around it using a DCF. From my comment above "I think that Henry is being pretty conservative here - but his numbers stack up based on his assumptions". You can change either valuation's assumptions to create your own... |