Get into Google before Wednesday, Ski Daddy!

Jim Cramer is telling you to “get into Google before Wednesday.”

What happens when the best story on earth goes on the road to tell itself to dozens of the largest accounts in the world?
I think it goes higher, especially when it dawns on people that there may not be enough Google to go around.
All last week I watched in amazement as Google acted terrifically in the face of a mountain of supply. I know, from my sources, that much of this massive secondary offering deal is already taken.
But now the company is going on the road to tell its story, including a boffo Wednesday lunch in New York. Can you imagine? It’s like spraying lighter fluid on general alarm fire! I mean, this thing might be priced at a premium to where it is right now.

Google lacks in many things, but outstanding shares is certainly not one. This is the same company that forgot to register nearly 30 million shares and options it had issued before it went public. There are now nearly 280 million shares of Google. If you want one, just buy it. You don’t have to be on the “in” of its next offering. Boffo lunches don’t drive the market, earning do.

We’re now a little more than a month away from Google’s next earnings announcement. Wall Street’s current estimate is for $1.35 a share, however there’s a pretty wide spread among the forecasts. Current projections range from $1.14 to $1.44 a share.

The best thing about a Google income statement is that if you don’t like one result, you can simply choose another number. There are several to chose from. When, say, GE reports its bottom line number, investors are basically stuck with it. Not so for Google. Take last quarter. Google earned $476 million. Easy, right? But that includes the “non-cash, stock-based compensation charge” of $47 million. You don’t want that, do you? And don’t forget traffic acquisition costs (or TAC if you’re cool) of $494 million. So Google’s bottom line was $1.19 a share. Or if you go by diluted shares, it’s $1.27. Or you can include the “non-cash, stock-based compensation charge” and get $1.36. Take your pick, it’s all good.

For next year, Wall Street expects at least one earnings result of $7.33 a share. This means that Google is worth about 43 times next year’s earnings. A bargain, right? Not exactly. A better estimate was recently done by Professor Aswath Damodaran of NYU. His research shows a valuation for Google at $110.13 a share. Click here for details. (Warning: link contains math).

However, I’m assuming Dr. Damodaran wasn’t invited to the boffo lunch.

Posted by on September 13th, 2005 at 3:11 pm


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