It's all about inflation. And disappointed expectations. And hope. And fear. Oh-- and the Internet advertising market.
Which some people would characterize as a bubble. Consider that Google's quarterly report divulged adjusted earnings
per share of $1.54, disappointing analysts who were expecting about 25 cents more per share. Now consider that Google
was trading in the mid-400s per share. As much as 50 bucks was knocked off its price during a cyclonic after-hours
ride. GOOG stock prepares to open this morning down over 10 percent. That's Wall Street for you: a game of psychology
and speculation more than accounting.
Over 16-billion dollars of shareholder equity has been
wiped out in the past 24 hours. (I imagine some recently hired employees showing up to the 'Plex in a grim mood
today.) The blow was so severe that index futures across the board were
affected. Robert Holmes of TheStreet connected
the dots between Google's crash and the rising dollar against the yen. Whatever.
Google's fourth-quarter
results, by any measure except Wall Street's are spectacular. Riding the Net-ad boom (or, more accurately, galvanizing
it), Google gained 86 percent over the year-ago fourth quarter. The company is expanding its product line at a dizzying
pace. The stock hasn't exactly been brought down to earth, and GOOG's market cap makes seven-year-old Google one of the
richest media companies in the world. Disappointed expectations don't bother me. I'm more worried about the publisher
lawsuits and Google's China policy.
The Higher They Go...
Reader Comments
(Page 1)2. A 10% correction is pretty mild for a technology company that "misses" in some meaningful way. Whether the stock holds in around here or not depends on how it will effect psychology around the stock. Since they don't provide guidance the miss doesn't necessarily dent their credibility. However as people may take a harder look at what Eric Schmidt and the rest of the Google team are doing on the execution side they may be graded a bit more closely. Then you have to figure out what multiple you would put on $11-12 per share in 2007 earnings. For my money I'd say it's attractive close to $350 and ugly at $450. At these levels it's best to sit back and watch.
Posted at 11:45AM on Feb 1st 2006 by Kris Tuttle
1. Google's story is a very common one. When high-growth companies with sky-high P/Es disappoint for the first time, you can usually expect a significant sell-off. Another recent example is Krispy Kreme (not that Google will necessarily follow KKD's fate).
Posted at 9:49AM on Feb 1st 2006 by Somerset Frisby