Well KG4, as always do your own DD on GOOG. And of course, I've been in for a while so its easier to be bullish when you have a gain. However, I really believe this is one of those situations where just when the retail investor thinks he has this whole stock market thing figured out, mr market offers up a doozy, and that is Google. Most retail money in Google is short, I believe. Or in puts due to the high stock price. The average retailer is convinced GOOG will go down and he has bet that way and lost for almost a year now. GOOG is going up on earnings, one analyst has cash flow at 630 million for this quarter alone. IOW they are bringing in over 2 billion in cash at the low end this year. Their earnings numbers are actually *understated* because they are expensing some options (not employee options but other options used pre-ipo) and they use conservative revrec. The street knows this so when they make $8 in 06 (my estimate, street says $6.50-7) it really is more than that if you look at cash generated. Only retail newbies think stock options and depreciation are real expenses, analysts don't. You pretty much have to put a 50 multiple on the low end $7 earnings for 06 to arrive at a stock price of $350. That is why the stock is going up, in fact fidelity just increased their stake by 50%. Now, you are going to hear retailers scream that 350 is a bubble, because GOOG doesn't deserve a 50 multiple (avg S&P multiple is 18 last I looked). But retailers are stupid because that $7 is actually wrong, it should be $8 and with an agressive CFO would have been $9 (no options etc). Institutions know this.
Take a look at option open interest if you want to see how the little guy is betting. He is betting down.
The ability to grow like google is doing is reminiscent of the internet bubble for sure. This business allows worldwide growth all at once. Its like when amazon tripled their revenue in one year early on, a pretty exciting financial model. But you have to be careful as we all learned in 00-04. But that ability to generate money like this didn't go away when the bubble burst. |
