When the going gets weird, the weird turn pro. - Hunter S. Thompson

22 November 2006

Overpriced at $85? (sigh)

When Google went public, I steered friends (all of whom are, thankfully, still speaking to me) away from the IPO, feeling that the stock was overpriced at its opening value of $85/share.

Now that Google has broken the $500/share barrier (with no ceiling in sight), another one of the Google Stock Price Milestone stories has hit the papers.

Of course, there are still naysayers:

As with any highflying stock, though, a few investors are actively betting on a reversal of fortune. Fred Hickey, who writes the High-Tech Strategist newsletter from his home in Nashua, N.H., says that Google’s shares are sharply overvalued and will fall as investors notice that the company’s rapid growth is slowing.

He points out that its revenue increased 11 percent from the second quarter to the third quarter — a brisk pace, to be sure, but a lot less than the 18 percent pace in the corresponding time a year earlier.

“Google showed the sharpest revenue slowdown I’ve seen,” he said, “and nobody has paid attention.” He argued further that the company’s expenses are “out of control,” and that if the economy headed into a recession, Google’s revenue would falter and its profits plummet.

“Google will suffer the same fate that Yahoo did in 2000,” he said.

Mr. Hickey has put his money where his mouth is: he sold Google shares short, a bet that the stock price will decline. But not much: the short position is just 50 shares.

“I just wanted to be able to say I was short Google when it blew up,” he said.

A $500 Milestone for Google Believers (New York Times, November 22, 2006)

Heh, yeah. He's "short Google" in almost exactly the same sense (and not far from the same dollar value) that I am "long Berkshire Hathaway."

Hey, a couple of Class B shares (and continued fractional investment via Sharebuilder) is a position...

Stop laughing.

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