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Google shares may fall another 50 pct-Barron's


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Google shares may fall another 50 pct-Barron's

Google shares may fall another 50 pct-Barron's

Shares of Web search leader Google Inc. -- off 24 percent from highs set last month -- could face a further 50 percent decline, Barron's said in the financial weekly's February 13 edition.

Barron's scenario for a fall in Google's stock is based on speculating about what may happen if mounting competition or fraud by users of its Google's ad-buying system led to a 20 percent shortfall in bullish analysts' 2006 revenue estimates.

The weekly uses a back-of-the-envelope calculation to show how a 20 percent revenue miss could cascade into a 30 percent profit shortfall. Such a drop could then lead to a decline in the price-to-earnings multiple of the stock to 30 times earnings from the present P/E ratio of 41, it said.

"That would make the stock worth $188, versus its recent $360," Barron's reported. The stock traded at levels above $471 on January 11, but closed at $362.61 on Friday on Nasdaq.

The story recites the usual litany of threats to Google's business -- potential competition from Yahoo Inc. and Microsoft Corp. and the vulnerability to Google's advertising franchise from "click fraud" fake ad transactions. And it criticizes the wide use of employee stock compensation.

Barron's quotes several Google bears -- two Wall Street analysts with "sell" ratings on the stock, bearish investment strategist Fred Hickey and former Merrill Lynch Internet analyst Henry Blodget, who a month ago laid out a case for Google falling to $100 on his InternetOutsider blog.

The weekly also sees Google in growing conflict with book publishers, cable companies and telephone companies.

Post Sun 12 Feb, 2006 11:26 pm 
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