Google bears emerge from the woods

by Mathew on January 20, 2006

It’s nice to see a couple of brave voices suggesting that Google, which has climbed by almost 400 per cent since it went public less than 18 months ago, might be a little overvalued — or at least “fully valued,” as analysts like to say when they’re trying to be cautious. Are they right? That remains to be seen. But it’s difficult to feel comfortable with a stock (particularly one with such a short track record) when almost every analyst that covers it has a “buy” or “hold” rating.

Small companies can grow as quickly as Google has and not hit any speed bumps or potholes, but a company that goes almost straight up from a market value of about $22-billion to one of almost $130-billion is doing the equivalent of driving an ocean freighter at the speed of sound. Bumps are inevitable. When analysts are uniformly bullish, many investors take it as a contrary indicator — and they are probably right to do so. Such an atmosphere suggests that whatever weaknesses or risks there might be (and they almost always exist) are being either ignored or glossed over.

Could Google be the Web equivalent of Wal-Mart, which went from being a small, regional retailer to the biggest company on the entire planet? Sure it could. But it’s unlikely to get there in two years when it took Wal-Mart two decades. The Internet is fast, but it’s not quite that fast. And that’s why it might be handy to know about some of the potential speed bumps in advance.

Please read the rest of this column in progress at

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