Scott Kessler of S&P’s thoughtful new “sell” report on Google does something unusual and highly useful. It contains the following useful precis of another analyst’s (Scott Devitt) recent Google downgrade:
Analyst Scott Devitt thinks GOOG outstg co., but thinks it overvalued…. Has historically noted GOOG’s excessive valuation but maintained hold rating due to cont. momentum, positive sentiment… Believes sell side expectations, ratings have risen throughout ’05 to point that will limit upside potential… Notes YHOO’s results last night broke sector momentum, sentiment which should force investors to focus more on what these bizs are worth rather than where stocks may be going… Also cites unsustainable pay/click pricing as an issue…
It’s a good question analyst Devitt asks. Has the news on Yahoo broken the fever dream in which Google investors find themselves?
[Update] The ever-entertaining Jeff Matthews makes me feel like it’s my fever dream, not Devitt’s. Here he is on why Devitt isn’t really worth listening to:
Indeed, Devitt has been the analytical equivalent of the stopped-watch on Google, telling Bloomberg back in October “For me to get positive [on Google] I need a pullback of somewhere between 20 and 25
The pullback didn’t happen.
Meanwhile, at the same time Devitt maintained a “Hold” on Google in light of “increasing risks” to its
business model, he was one of the Street’s biggest fans of Overstock.com, rating that stock a “Buy” with a $55 price target.