Google Tops $500 a Share Again – An Indication Of How Crazy This Market Is
22 September 2009
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Google (GOOG) hit $500 a share today while earlier this year, it was at a low of $247. Yep, you got it, that’s over a 100% increase. While at risk of sounding like a broken record, this stock market is crazy.
Google's climb back to $500
So, the question is: Who the heck is buying Google at $500 a share? Is that what you call a good entry point? Wow.
Don’t get me wrong. Google is an incredible company. But this valuation is completely out of control.
My guess? We are days away from a severe market correction. While I’ll probably be wrong (as I’ve been wrong all summer), the risk here is getting crazy. I hope you all put your seat belts on.
What makes you think that $500 is some magic number that’s crazy? Because it’s a high number? GOOG has never split. It’s trading at about a 34 P/E ratio, and makes a vast majority of it’s money through on-line advertising, basically the only advertising market that has been consistently growing, even through the recession.
Of course $500 is not a magic number. The point is the run it has been on. Do you think a 34 P/E is appropriate? I don't. Yes they dominate online advertising but their largest growth is in the past. Google is still a great company, but i don't think their growth justifies a 34 P/E but i could probably list 50 companies that I think are overvalued.
At this point, valuations are succumbing to market momentum. It will probably continue to work… until it doesn't.
I'm sitting tight.
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