Oct 18, 2007 113 reads by Navneet Kaushal

Google's chiefs face questions following powerful stock surge informs the Independent as Google share price suddenly surged through $600 – barely three years after they were floated at $85.

Technology analyst Mark May at Needham & Co, suggests that the No.1 Search engine company should think about, snipping its shares into 10, with new shares valued in the $60-$70 range.

"Unfortunately, retail investors and the mass media are often confusing a high stock price with a high valuation. Some, and possibly many, are interpreting 'Google $700' as a sign that the internet bubble has returned. We believe this misperception is bad for Google shareholders and for the internet sector at large."

Google's founders, Larry Page and Sergey Brin, and CEO Eric Schmidt, do not seem to be hassled and do not show any interest over splitting the stock. Therefore, it might be up to Wall Street to dispel the misbelief that the valuation is stretched.

There is absolutely no doubt that Google's valuation is optimistic. The search engine company currently has a market valuation of $195bn. It is trading on about 40 times this year's likely earnings per share and that multiple falls to a still-high 30 times next year. The company is valued at nine times next year's revenues.

The report goes on to say that, "These seem mundane investment questions relative to the wild assumptions discussed to justify dotcom boom valuations of companies with no discernible profits at all at the start of the decade. Some tech companies are much more airily valued than Google (its Chinese rival Baidu.com is on earnings multiples three times as high, for example, and don't even ask about the valuations being bandied about for Facebook), but there is not a single sell recommendation on Google stock on Wall Street."

Navneet Kaushal

Navneet Kaushal

Navneet Kaushal is the founder and CEO of PageTraffic, an SEO Agency in India with offices in Chicago, Mumbai and London. A leading search strategist, Navneet helps clients maintain an edge in search engines and the online media. Navneet's expertise has established PageTraffic as one of the most awarded and successful search marketing agencies.
Navneet Kaushal
Navneet Kaushal
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