Two weeks ago, Google shed $5 Billion in market cap on Barrons’ article claiming Google is overvalued. Google’s current P/E is 61, or around 37 times FY 2007 earnings estimates. Google’s price has been stalled ever since.
Barrons has a history of predicting Google’s crash. And Google stock has a history of going up. For example, in February Barrons predicting Google would crash to as low as $175, and in November Google topped $500.
Does anyone at Barrons use the internet? Let’s not pretend, Google’s running the show. No search engine competes with Google. And Google Adsense pretty much single-handedly revitalized the internet, spurring the current Web 2.0 boom. Gmail revolutionized email, and may have just got perfect. What other company comes close to Google’s internet innovations of the past five years? Microsoft? Yahoo? Is a forward P/E of 37 really so expensive?
Okay fine, maybe it’s time for Google’s stock to rest for a few months from its steady ascent, but Barrons’ gloomy predictions strike me as a bit overblown.