It got to quittin’ time Wednesday and I buzzed on home daydreaming about the nearly suicidal feast that was awaiting me the next day—I could leave Google in Mountain View for Thanksgiving, I thought. But during the commute, listening to the only guy that makes Wall Street interesting for me on the radio, Jim Cramer began his segment—a long one—on (what else?) Google. His not “too absurd” estimate put GOOG at $450.
And really, that type of estimate doesn’t make waves, not now anyhow that Google is squatting at $420. Why couldn’t it make it to $450? The kicker was, that was a conservative estimate only because Cramer didn’t “want to sound too absurd” with his enthusiasm.
“You still have lots of stocks that are more expensive than Google with growth stats that aren't as good," he said.
He was using a time-tested rule of thumb, projecting value with a multiple of 50, or twice the growth rate as the upper limit for calculating the price-to-earnings ratio.
But at the current growth rate of 33%, “I should be willing to pay 66 times earnings for Google."
His reservations about pricing Google that high are matched by many analysts, who at most, will project the stock to reach $475. But the dreamy side of Cramer is right in line with another hip-shooter, UBS analyst Benjamin Schacter, the only
one of 22 analysts brave enough to call it at $500.
"Based on Google's current products and trends, the stock remains undervalued," Schachter said. “"Even if most of its future products fail, the underlying fundamentals of its current offerings are solid."
Well this is interesting, isn’t it? Google is doing so well, that even the most skilled and well-known analysts in the country are scared to call it, for fear of looking stupid. It can’t go on this way, right?
David Utter places an interesting quip in this
article, questioning Google stock by alluding to the famous story of Icarus, the boy who flew too high.
But I’m going to quote Mae West.
“He who hesitates is a damned fool.”
The Google 500; How High Is Too High?
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