Barron's Sends Google Down $20 - Is It Right?

Barron's analysis (see summary) of Google at $500 is pretty good, actually, although it's hard to be agog and appalled about a 37-times-forward earnings multiple (43-times if you include the stuff that analysts should be including).

The key point in the article, which many Google boosters miss, is that continued deceleration will lead to continued multiple compression, regardless of how amazing a company Google is.

40-ish times earnings/cash flow for a steady-state 40%-plus grower is fine, but in the face of ongoing deceleration, the 40x could easily go to 30x or 25x--or, worse, if Fred Hickey and others are right and American consumers are finally deciding not to buy everything they see. Even a 30-times multiple would put Google under $400 again.

Comments

[Jonathan Almy:]

Personally I would reconsider blaming Barron's for hitting Google Monday. Many companies fell with even better fundamentals only because they got caught up in Monday's undertow. Institutions don't follow Barron's in order to make portfolio adjustments.

2006 Nov 27 11:03 PM

[kkin365:]

Blogett's summary is well done. The Barron's piece (a short commentary, not really an "analysis") is also well done -- clear and to the point. The key point, that the company's growth is decelerating, is so cleary covered in the piece that a reader is unlikely to miss it. In the light of Almy's comment, how does one know whether the institutions are buying, selling, or just watching on the sideline? omooc

2006 Nov 28 11:56 AM

[manfred kan...:]

The Barrons piece is horrible, again, like earlier in the year circa March. Santoli and his editors need to figure out how to write objectional financial columns which address the PROS and the CONS. It is common knowledge that with huge size, comes slower growth as the investment world has since MSFT evolve. Barron's has been bashing GOOG since $150. That's alot of crow for them to eat. When they do finally come around to liking the company however, run!

2006 Dec 01 01:04 AM