Google Valued at 80.82 Billion

Yahoo! ^

[Asphalt]

According to Yahoo Finances, and the Drudge Report, a search engine is now worth more than TimeWarner. Something seems fishy.

[Sonny M]

Its almost twice what I paid for it.

That said, I have a stop/sell order standing if it drops to a certain level.

[Toskrin]

I agree. I'm not buying Goog...but I'm also not Shorting a company that earns $1 Billion plus in ever-growing profits each year.

Agreed. I don't short at all - it's a losing gamble. They have a good future, but don't count on their future profits being ever-growing. They are priced like their future growth is guaranteed.

If Google borrowed $20 billion, they would lose money. All their profits, and then some, would be eaten up by the $1 billion a year interest carry.

No matter how you value them - equity, sales, or earnings - they're not worth $80 billion.

[Moonman62]

No matter how you value them - equity, sales, or earnings - they're not worth $80 billion.

All I know is 40 years from now when Yahoo and Google are $3 trillion dollar companies and someone looks at their charts with a 10 year moving average, that line is going to look pretty smooth. Microsoft once had a high P/E and it eventually turned into a money making machine in the DJI.

[JasonC]

Gentlemen, Google is no longer just a search engine. That is where it started and how it made itself known. But the real story behind it was the technology that lets it work as well as it does, and that technology is now being applied to a score of additional problems.

They have been hiring their pick of the smartest people on the planet for a couple of years now, and pushing that technology farther. You haven't seen more than the tip of the iceberg yet. Will the whole thing ever be worth $80 billion, present value? Way more than I know. But it is not the present position or past accomplishments of the company that are getting that valuation.

Google has been spidering the WWW for years now. That means they wrote the software for the semi-intelligent "bots" that access server after server all over the world, tracking every link, in the most complicated artificial system in history. They assemble the data from those network explorations and build the most accurate maps of it. They store the content of the web in their cache - 60 terabytes of data at a time, far far more than that overall. Their programs scarf webpages, parse their content, and pass processed information to automated learning algorithms. No human being could stuff between his ears what their computers know.

Their computers are literally learning languages right now. They find webpages that are human translations of the same text or news item, and use them as "rosetta stones" of acceptable human translations with full context, to add to their dictionaries. They build models of dependence of meaning on context to provide better automated translation. They get progessively better at it as they process more than more information, in a wider variety of contexts. Before too long, Google will be able to present any website in the world in the user's preferred end language.

That is one small step. They are building systems smart enough to understand the web in order to present it better. Intel provides only DNA for the web, Cisco provided arteries. Google is aiming to be its brain. They might fail. But they've got billions to throw at the problems involved, the best minds money can hire, and a proven track record of clean and workable automated reinforcement learning adding real value. If anybody makes a machine (in fact, it will be a whole system of them) that can meaningfully be said to think, it is likely to be Google.

[Asphalt]

dang

[Toskrin]

Microsoft is a good example. If you bought Microsoft July 1, 1998, at a P/E of 57, you would have made no money at all, despite sales growth from $14 billion then to $39 billion now. But you would be glad you didn't buy it two years later, because you would now be out half your money.

I have no idea if Google will continue their frenetic earnings growth, but I know there's a pretty good chance they won't. And even if they do, like Microsoft, there's a good chance that the P/E won't stay as high as it is now.

[sixmil]

We finally agree on something.

[Moonman62]

I was thinking more of when MSFT was a newly public company, but you probably already know that. I'm also sure that Google won't continue its current earnings growth, but that it will probably recover and keep on growing, selling services we can't even think of yet.

[Abathar]

This was the exact argument that was given before the bubble burst last time. Yes Google has earnings growth, but unless there are hard assets behind it then you really have nothing. 1 plane crash that kills just a few key employees and that stock could go into a tailspin, that is not the same for most corporations.

[Sloth]

I use Google one heck of a lot more than I use Time Warner products.

[Porterville]

I don't know if this technology will endure time.... ten years from now will it matter? Most the information and technology available by google will be likely accessible without the need of google at all. It will probable be a small 2 MB program on everyones desktop that scans the internet as fast or faster~ or something along those lines...... I don't know~ seems like a AOL boondoggle~ it stinks like a dog.

[SAJ]

Google would have a bit of difficulty paying cash for GM. Their pot of cash simply isn't that large, about $2.5-3B or so, therefore, in order to buy GM, they'd either borrow or pay for the purchase with treasury shares, or some combination of the two. The mkt generally hates seeing a new or newish IPO dilute the shares by issuing more for a buyout, and GOOG doesn't want to tarnish the mkt's view of their shares (with a ttm P/E of 118, I can't blame them, either), so one can fairly conclude that they would borrow to buy.

OTOH, why the devil would they? Who wants GM, so colossally mismanaged over the past few decades?

BTW, rather than either buy GOOG or short it, the trader should consider purchasing the Jan at-the-money straddles. Unless the whole of Wall St. simply starts ignoring the shares (highly unlikely, I think), the probability that GOOG won't move $40-50 or more in 90 days' time is quite small. The Jan straddles are going for about $73.40 as I write this, and even a $40 move by September will produce a pretty tasty profit. Not to mention that, historically, stocks like GOOG can easily move up another 50-60-70% before the mkt decides to take its own temperature and lie down for a bit, so there's additionally a decent possibility of an outsized %age gain here.

Good trading to you!

[Moonman62]

Yes Google has earnings growth, but unless there are hard assets behind it then you really have nothing.

Like I said before, you'd have lots of agreement in the few communist countries remaining. The rest of us will stick with markets, which do assign value to services.

[walden]

"Goggle stock is like a baseball card everyone wants, but once someone notices it's only a baseball card, the price will more accurately reflect it's long term earning potential."

Or a tulip bulb. ;)

[Moonman62]

It will probable be a small 2 MB program on everyones desktop that scans the internet as fast or faster~ or something along those lines...... I don't know~ seems like a AOL boondoggle~ it stinks like a dog.

Google and Yahoo already have desktop search programs. Change and innovation in rapidly growing markets almost always leads to more opportunities, not less, provided that the government stays out of it. Is America a great country, or what?

[Southack]

"OTOH, why the devil would they? Who wants GM, so colossally mismanaged over the past few decades?"

Exactly.

[Porterville]

But who would needs google if all computers (or most) are linked to a peer to peer network and actually help each other search for information?

[Eyes Unclouded]

Blast from the past y’all.