Unless something changes fairly dramatically, 2006 stands a good chance of being the first calendar year to end with Google’s stock below where it started. Granted, GOOG only traded for the last part of 2004, but it did trade upward for all of 2005.
The current year, however, has been a disappointment for Google bulls, with the company’s stock currently trading at $377.85, well below its 52-week high of $475.11. It is also below the $414 price at which Google’s stock started the year.
How much should investors read into this, if anything? While some will say it’s just normal and inevitable consolidaiton in a formerly fast-rising stock, I think there is more to it than that. Investors have consistently sniffed at solid quarterly earnings, nervous at two things: Google capital expenditures that rise faster than earnings, and the perception that Google remains a one-trick AdWords pony.
So, what will it take to change things. Easy. If Google shows material contribution from a new product or service, or puts up a quarter with less startling capex growth, I’d be unsurprised if the stock found its footing in a hurry.