Thursday, October 19, 2006

The Googleiots

Google, here is a company that if you thing about it, its whole infrastructure could be recreated for less than one billion dollars. All of the stock is valued at over 129 billion dollars.

It doesn't really make much money, because if it did, it would pay a dividend.

Creative accounting? Maybe, but where is the income stream? I really don't think that it is there.

What do you call these investors? If you combine the two words google and idiot, you get google-iots. Best spelling I can offer is Googleiots. This would be defined as a person who will buy anything on the hope that it goes up forever. There has to be an end to this outrageous price, it certainly doesn't seem to be in the reality of the present time. So I guess that it can be said that we are in the midsts of Googleiots trying to sell to the greater fool.

What is the stock really worth, about $8 bucks a share. A reality check tells you , that if you are buying toilet paper for $2,000 a roll, you will find a cheaper source for the purchase of toilet paper.

3 comments:

John Doe said...

Yes, much like a house, stocks can be valued by the cash flow they throw off... if not an income stream of dividends, using a FCF (Free Cash Flow) model of discounted cash flows is fine.

Google is extremely successful at making money with advertising. Their search engine brings people to their site. The only real competition is MSN and Yahoo. The other guys provide a lot more content. In the end, it's all about determining the value of internet advertising. So far, many companies believe it to be worth a lot. The fact that a single company has cornered the market on internet advertising is not surprising... think about how big print advertising is, and how consolidated it has become... on the internet, there is scalability to the mooon.

While I don't believe that their business model is long-term sustainable due to barriers to entry, I do believe that they are doing quite well for now. And, people are paying for their success in the stock price.

Do I think it is a buy... no, but I wish I had followed my gut when it was $90/share right after the IPO.

John Doe

Raining on Parades in Seattle said...

More bloated stocks to come before the hard fall...new home prices fall the most they have in 35 years today and the Dow is at all time highs...

But the world is still apparently watching as the dollar fell and is less willing to give to our fake worth...

Anonymous said...

Nice point of view....

I have been starting to read a lot about google's story. It could be good before Google try to grab the Indonesian Internet Market.

About the extremely stock raising, I hope, it will not make a case like an EnronGate.

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