Google stock closed over 6 bills the other day and you’re probably sitting here thinking, “Why didn’t I get in on the IPO?” Well chances are, you probably thought that $85 a share was too much for your blood back in 04. I think it’s safe to say that Google stock is not for the faint of heart. The shares trade at 28 times 2008 earnings estimates. But it would be unfair to suggest that Google is absurdly expensive given its strong track record of growth during the past few years.
In addition, analysts expect Google’s earnings to increase by 44 percent this year, 28 percent in 2008 and at an average clip of about 34 percent a year for the next five years. That’s a much higher projected growth rate than Yahoo – yet Yahoo trades at 46 times 2008 earnings forecasts.
So the question is, how high can it go? If we look historically at stock prices, the price for one Class A share of Warren Buffett’s Berkshire Hathaway (BRKA) briefly topped $100,000, SunWest Bank is trading at $2,475 and First National Bank of Alaska is trading at $2,010. So as you can see, Banks not withstanding, there is plenty of room there for Google to grow.
Should you get in now? The answer is yes. Should you borrow to get in? Why not? The stock won’t be backing up. I can’t see Google imploding anytime soon. I can’t see Microsoft or Larry Ellison positioning themselves for a hostile takeover. In fact the only thing that seems logical is to quit kicking yourself for not getting in sooner. Although as a fall back Yahoo doesn’t look to bad either. Personally I think by the end of 2008, Google will be trading at over $700. What do you think it will be at? If you think there was buzz for the iphone, watch what happens when the Gphone comes out!