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  1. #1
    AdCaliber Magic2K2's Avatar
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    GOOG overpriced?

    Hey guys, I'm thinking of shorting Google stock because common sense and experience in the web industry tells me it is really overpriced and they aren't much different than Yahoo or MSN. YHOO trades at about 35, yet GOOG is at like 240! It just doesn't add up for me so maybe I can cash in on GOOG being overpriced.

    Anyways, the reason I post this is b/c I'm not really much of a stock guy and don't understand the financials that well. Would GOOG at 240 equate to roughly 8x the value of YHOO at 30 or so? Or are there other factors involved (maybe less shares issued)?

    I'd be most grateful to anyone who can help me here while I research this.

  2. #2
    My true identity MaxS's Avatar
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    I wouldn't invest in Google this late in the game. I know many people who invested early when it was around $100 per share who sold around $200. To be honest, I can't see puting forward that much money this late. I don't know how much higher it can go.

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    AdCaliber Magic2K2's Avatar
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    Quote Originally Posted by MaxS
    I wouldn't invest in Google this late in the game. I know many people who invested early when it was around $100 per share who sold around $200. To be honest, I can't see puting forward that much money this late. I don't know how much higher it can go.
    Exactly. I am thinking of shorting the stock, which means I want it to go down!

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    SitePoint Guru Marubozo's Avatar
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    Technical indicators are showing it is definately overbought right now, but google has been surprising since the IPO. I initially thought the IPO price was too high, so didn't get involved. Unfortunately I was wrong.

    If you do short GOOG, I would do so by buying some put options to minimize your overall risk, or at least hedge your short call with a combination of calls or a straddle. It is just too difficult to say what this stock may do.

  5. #5
    SitePoint Addict iMatt's Avatar
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    I think it is way too high. However, it climbs at a fairly good rate every day. I think a solid 1% it is? Maybe I'm wrong. I know it goes up about 2.00 a day though and that's good. But $200+ for one share of stock is outrageous.

  6. #6
    SitePoint Guru Marubozo's Avatar
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    Quote Originally Posted by iMatt
    But $200+ for one share of stock is outrageous.
    Not always the case. Given the current share price, and google's earnings and projected earnings, and the amount of shares outstanding, it isn't completely out of the ordinary. Yes, the high share price intimidates and reduces the number of people willing to invest, but when you consider the current price with the outstanding shares, and what they have been able to produce as far as revenue is concerned, it isn't out of the ordinary.

    Look at Berkshire Hathaway... they are trading at $84,000 per share, and people are still trading it. Of course, this is slightly different than Google, but the point remains. The value comes from the number of outstanding shares and the revenue and profit earned by the company.

    I do think GOOG will be looking towards a forward split sometime soon, because they do need to get the share price down to attract more investors. Only time will tell how long that will be, but I do find it hard to believe they will maintain this kind of share price. They will for as long as possible, but eventually it will be time to split.

  7. #7
    SitePoint Enthusiast alpeb's Avatar
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    Indeed, share prices don't mean anything because it depends on the number of shares. One good indicator is the Price Earnings Ratio, which for Google should be now in the sky. My opinion is that the company is extremely overvalued and will have a tremendous drop. Google is nothing more than hype.

  8. #8
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    I Think it is overvalued. If you look at the market cap Google 67.11B with 3.79B revenue and 2.51B cash while yahoo 50.73B market cap on 3.99B of revenue and 3.33B in cash.

    The choice is Yahoo

    When Yahoo finally introduce Yahoo Search Marketing it is going to take some share away from google for sites like....all of us who visit this site

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    SitePoint Enthusiast alpeb's Avatar
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    Quote Originally Posted by ccourt23
    The choice is Yahoo
    Oh yeah, Yahoo's business plan is a lot more solid. I'd put my money in YHOO (if I had any...)

  10. #10
    AdCaliber Magic2K2's Avatar
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    I'm definitely thinking of shorting GOOG, but the question is when? When do you think it will peak? On CNBC, Kramer is predicting 335, but I'll take that with a grain of salt

  11. #11
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    Quote Originally Posted by Magic2K2
    I'm definitely thinking of shorting GOOG, but the question is when? When do you think it will peak? On CNBC, Kramer is predicting 335, but I'll take that with a grain of salt
    Shorting it might get you in trouble.... It may be overpriced but its the hot stock of the market....so who knows....it might hit 300...however one miss in estamates and stock plunges

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    SitePoint Enthusiast alpeb's Avatar
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    I predict GOOG will peak at 278.42 on June 3rd, 10:08:12 am, give it or take two or three seconds.

  13. #13
    l 0 l silver trophybronze trophy lo0ol's Avatar
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    I think Google's innovation is part of the reason why investors seem to like it. Now it seems almost weekly that Google announces a new feature or new tweak for themselves. It's that perpetual in-the-news sort of feel that investors like.

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    Serial Publisher silver trophy aspen's Avatar
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    I think stock shorting should be left to people with a very good understanding of the market and the companies they are shorting. It doesn't sound like you have that understanding, so I wouldn't do it.

    The fact that your main basis is share price really tells me you shouldn't be doing it.
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    SitePoint Addict rcd01's Avatar
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    I think stock shorting should be left to people with a very good understanding of the market and the companies they are shorting. It doesn't sound like you have that understanding, so I wouldn't do it.

    The fact that your main basis is share price really tells me you shouldn't be doing it.
    Good advice - please don't play around with shorting a stock if you don't have the understanding and especially with option strategies such as stradles.

    I encourage you to learn though and good luck with picking an investment!

  16. #16
    SitePoint Zealot medicus's Avatar
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    Shares involving BIG internet companies are overpriced ... Its not Google only ....

    Long term investments are good ... Short term invetsments to me mean sitting infront of my PC and doing buy/sell orders multiple times a day which is taxing for your nerves and may prove catastrphic to your sanity

    If you really wish to trade buy a few books, learn, observe the market, have a few thousand $ to throw and try and you may succeed. Or get someone who knows what he is doing and let him invest for you ..
    Thats my 2 photons ... somewhere in my babble ...


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  17. #17
    SitePoint Zealot funpage's Avatar
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    Google is highly priced because it has high growth expectations but if you look at the price earnings/growth ratio, google is cheaper than yahoo.

    And no, google is not worth 8 times yahoo. The number of shares outstanding x share price = value of the company (market cap), google is worth roughly 1.5 times that of yahoo.

    Shorting a stock can be very risky, theoritically your loss can be many times what you put in, while when you buy a stock you only risk what you put in.

    Quote Originally Posted by Magic2K2
    Anyways, the reason I post this is b/c I'm not really much of a stock guy and don't understand the financials that well. Would GOOG at 240 equate to roughly 8x the value of YHOO at 30 or so? Or are there other factors involved (maybe less shares issued)?

    I'd be most grateful to anyone who can help me here while I research this.

  18. #18
    SitePoint Guru Marubozo's Avatar
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    Quote Originally Posted by funpage

    Shorting a stock can be very risky, theoritically your loss can be many times what you put in, while when you buy a stock you only risk what you put in.
    Exactly right. That is why all of my short plays are done with buying put options. This way you can still profit from the stock going down, but just like going long a stock, you can only lose as much as you invested, compared to the virtually unlimited losses technically possible by shorting a stock outright.

  19. #19
    SitePoint Member M_I_K_3_Y's Avatar
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    ....Please be very careful with your intentions on short selling this "pig"....you can't stop a runaway train and its very risky business, they are trying to become a mini-bershire hathaway of the net business hence the reason we havent seen a stock split, even though you may 'think" the stock is overvalued and more than likely it is, these predictions are for forwarding EPS and growth not too mention becoming a Wall st darling if you will. This company will grow at tremendous rates but I would certainly Not short the stock here for a longterm position just yet. Sure the volatility in the stock is a traders dream because of the 10-20pt daily moves, if it is your intention to do so be sure you follow the charts very carefully. If you are not invested in the company at this point you're better off finding a cheaper valuation play in the sector....Always remember "the market" is always right, and you should not fight it...As with any investment be sure its never more than 5-10% of your portfolio...."the old adage PIGS get slaughtered" will always remain in the markets, dont let fear and greed control your emotions and always do your OWN research...Good Luck!!!

  20. #20
    SitePoint Wizard LeoWebDesign's Avatar
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    Shorting stocks is risky even for those that do know what they are doing, which is why most of those people don't do it.

    You would be much better off buying some Yahoo stock if you are in the gambling mood, or maybe playing some online poker :-)

  21. #21
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    Don't ..... don't ..... don't

    Why would you try to stop a train?

  22. #22
    SitePoint Zealot oalhajjar's Avatar
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    I certianly wouldn't put any weight into what others think of the stock -- certainly not a message board or Cramer on CNBC.

    Do your own research and figure out if GOOG is fairly price, or overprice, or even underprice. What do you think of the future expectations of their revenue growth? Will adsense/adwords keep growing (which will increase GOOG's revenue)? How about the search engine itself -- any growth potential there? Their sector as a whole? Their competition? How well positioned are they to take over the search space (if they haven't already done so)? Is the management doing a good job of guiding the company?

    Those are just some qualititative questions to ask when you start thinking about investing in a stock like GOOG. Certainly you should poor over their financial statements as well. Lots of debt? Can they pay it off? How about their margin? etc etc etc.

    No one can tell you where the stock is going. Certainly no one can even time the market to tell you when to get in on a position. Do your research and come to a conlusion. You can purchase put options on the stock as a play against further appreciation of the stock (similar to shorting but the maximum you can lose is the price of the put which is much less than the price of the stock).

  23. #23
    SitePoint Guru MG315's Avatar
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    as said above, google has a lower P/E than YHOO, and if you use yahoo's P/E with next years earnings estimates, you'll get a target price of $350.

    When google had its IPO i thought it was overpriced, when it reached $200 I realized the value in the company and its growth potential. I put a buy order in but unfortunately it kept going up and never went low enough for it to execuute. Tired of waiting, I finally got some shares at $229. In the few weeks I've had it, its gone up 16%, and I still see it going up.

    Just because you didn't buy it at the bottom doesnt mean its overpriced. When Berkshire hathaway reached $250 i'm sure people thought "oh well i missed out on that great buy."

    Do your own research, determine what you think the future is for the stock and if it is a good buy. Don't depend on other people telling you what they think. Personally I only own 2 stocks (one of which is GOOG), and those account for only 8% of my portfolio. The rest is in ETF's, REITs, bonds (mostly junk bonds), and commodities. I only buy a company if I think it is of good value and will continue to be a great company a long time from now. And google's been performing great while i've held it.


    so if you are gonna short it, you better be playing the short term volitility and not a longterm correction. but i wouldn't short it at all

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    SitePoint Zealot alicia101's Avatar
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    Yes, google is over priced.


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