Google’s Stock Goes South Early

I wrote a column last week for the National Post wherein I predicted that Google’s stock would follow eBay’s south by early February. Sadly, Google’s mischievous shares have seemingly chosen to go lower early.

When I wrote the column at end-of-day on Thursday Google’s stock had closed at $194 or so, and today it ended the trading day at $180.72. While that is a spiffy 7% move downward, which fits with my downbound thesis, it is a tad ahead of schedule.

Ah well, better to be early than outright wrong …

[Update] A couple of emailers have asked to see last week’s timely NatPost Google column, so here is some of it. For brevity (and to avoid aggravating my editors at the Post) I have stripped out some paras and replaced them with ellipses, so if it doesn’t flow well blame my quick-and-dirty excisions …

They are the four horsemen of technology: eBay, Amazon, Google, and Yahoo. And one question is on everyone’s lips – When is Google’s stock going to break?

It won’t be long. The three other horsemen of technology stocks have all broken, and worst hit has been online auction leader, eBay. The company’s stock tumbled 19% just on Thursday of this past week, reducing its market value by $13-billion. The company’s stock is now down something like 30% from it most recent peak, a remarkable collapse for what has long seemed a bullet-proof company.

Nevertheless, the strongest of the group has been Google. Since going noisily public back in the summer of 2004 the search company’s stock has soared to $200. The stock has almost tripled from its IPO, not a bad performance for a company whose IPO many supposedly smart sorts thought would fall, not climb.

But how long can Google’s shares avoid the doldrums and even outright whirlpools that have snagged its au-courant technology peers?

Not long. First things first, however: Notice that I’m not asking how long it will be until Google’s business breaks. Ad-centric search is still booming, with recent industry statistics showing that this year will be the first one in which online ad revenue exceeds offline revenue — a testimony to the health of Google’s core market.

Instead, what I’m really asking is how long until a company whose stock has soared in the last eight months, and that is trading at 220 times last year’s earnings, can successfully avoid any market missteps. Because, as eBay re-discovered this week, when you trade at pulmonary-edema-inducing prices it doesn’t take much.

A better bet, however, is that the combination of millions of shares of new stock on the market, combined with a financial release in two weeks that will be the last bit of financial news from no-disclosure Google in three months, could turn the trick.

So my best guess? Google joins its broken tech-stock peers – at least for a little while — by early February of this year. You heard it here first.

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Comments

  1. jaloti says:

    I presume you mentioned in your NatPost column that a huge block of stock comes onto the market this month after lockup expiration.
    Because that’s what’s really gonna make this baby tank . . .
    All those insiders who gotta take the money and run . . .

  2. Paul K. says:

    Yup, that was one of the main points of my piece: Lockup expiry as catalyst.

  3. b7j0c says:

    Added to which, Google’s “bubble” was extremely short-lived. Look at EBay, Yahoo, etc., many of these firms had multi-year bubbles that provided plenty of opportunity for practically every early employee to fully vest and cash-out at their leisure. At this point it looks like a fair number of people who consider themselves Google “old timers” (relative sense) are going to have to race to sell into a collapsing market. Ebay’s stunner will reverb through these stocks for a long time: growth is slowing for these firms and international markets (read: China) aren’t coming online fast enough with enough money to make up the multiples.
    Target price for GOOG is $70 by mid 2006.