Wednesday, May 15, 2013
Google (GOOG) Hits $911
$911... GOOG hit it today (02013.05.15). If too many people start speculating as to when GOOG will hit one kilo-dollar, then that might be a signal that some bubbles are going to start popping. But, on the other hand, GOOG hitting a $1,000 might signal the start of one of those special bull markets. Dot-com 2.0 (finally)?
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Holly cow! $911, that is insane. Let's look at some of the equity valuations Mr. Market is putting on Google: 3.9x Price/BV, 18.9x NTM P/E, 26.8x Price/FCFE (Free Cash Flow to Equity) which is back to 2010 levels and no where near the 54x reached during 2004.
ReplyDeleteRoughly, the market is expecting FCFE will grow about 12% annually with a linear decline to a stable 3% long term growth rate for about 9 years or so. This is rough (with just a little time spent doing the calculations), but those estimates don't seem unreasonable at this time.
Hello David. Thank You for your inputs and due diligence. Given that so many technologies are advancing at growth rates greatly exceeding 3% (and many of those growth rates themselves are increasing exponentially), it's difficult for me to believe that Google's growth rate is going to languish at 3% for the next nine years.
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