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Alphabet Inc. Message Board

  • pfe_long pfe_long Apr 6, 2006 10:29 PM Flag


    If the Market Cap seems unreasonable to you - this is not because of the high PE necessarily. In fact - I would not be surprised if a company had such a high multiple if it really sustains a growth as fast as GOOG did at the begining of the cycle. Say if a company discovered and had a monopoly over an aids treatment - or if a company had a viable monopoly over an alternative energy source that was acually usable, etc...


    What I DO NOT believe however is that GOOG is ACTUALLY growing at this rate. I had argued this point before when I was shorting the first time around between 416 and 470 and was vindicated at earnings time.

    The Growth in the internets is about 30%. Given that GOOG went through a gold rush period at the begining - when all large advertisers were rushing to the scene booking key words - I do think that the heavy weights are already in and that now bidding concept for keywords will eventually be harmeful in 2 ways:

    1- Smaller shops will not be able to compete with the larger ones for largekeywords - and given that the bigger players are already in - I see that hurting any growth beyond the intrensic industry growth at 30%

    2- There will be the big shot gambling cmopanies (the super bowl type companies) that put all their $ into advertising and it becomes a make it or break it for them. Those will more often than not be failures (like all the dot bombs that we had in 2000) and they will also hurt the growt overall

    I truely believe that GOOG is now beyond the gold rush era, they are gravitating towards the 30% industry growth rate (even if gaining market share) and if you add all the freebies they are involved with - I doubt that they will be able to make their numbers. That will hurt both - the EPS AND the PE ratio. And this is why I am expecting the lower end of the range for 2007 ($9) and a much lower PE (30) for a share price of about $270.

    They were struggling to justify the miss last time and they blamed it on taxes. However there was a good chunk of the miss that was still unaccounted for - excluding the tax loss.

    Now add the following things to that miss for this Q:

    - all the freebies (free WiFi deal, etc)
    - All the udeless / new / dissappointing products (gmail / googlebase / earth / moon / sun / ...)
    - All attempts at diversifications (automotive ventures / radio / movies / ...)

    - AND BIGGEST OF ALL .... OPTIONS EXPENSING - which no one has touched just yet.

    I am wondering all those analysts and Cramer and all other chearleaders - what is their opinions of the options expensing impact on next earnings??? Will we ever know in advance - just like they keep upgrading in advance? or is that going to be hindsight thing?

    Remember EBAY - remember what happened with them when they missed a couple of times and said growth is decelarating.

    Remember the CFO when HE TOLD YOU growth is decelrating.

    Do Not Be Surprised if you missed the signs while you were too busy chasing the stock and its options.

    GOOG have no liabilities since they provide no guidance. This Mickey Mouse theory that they could not have a bad Q if they just issued new shares is just a laughable fantasy. They have never promised you anything. Any Q they report is a good Q in their eyes. They are not responsible of what Cramer tells you or what the idiot with the $2000 price target predicts. Those are the kind of people who float the "analyst expectatinos" number and they are nothing but a wall street mafia.

    So listen to your own DD and listen to the ofiicials of the company. They are telling you Growth is slowing and they are cashing out like it was the end of the world. Really...does not take a genious to understand it. It just takes less greed from your side to see the light.

    Good Luck.

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