Is Google going to crash the IT sector?

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Is Google going to crash the IT sector?

I’ve recently found out that Google stock price jumped over $500 per share, and it’s just unbelievable! With such rate, it can be about $1000 per share… but wait… What’s gonna happen then?

Let’s make a very rough and dirty analysis of the Google stock (data is from Yahoo Finance):
Share price: $513
Revenue (ttm): $12.02B
Revenue Per Share (ttm): $39.361
Gross Profit (ttm): $6.38B
Total Cash (mrq): $11.94B
Total Cash Per Share (mrq): $38.312
Levered Free Cash Flow (ttm): $621.18M

It seems like the real price of a share is about $40, and the market price is about $500, the difference is about ten times. There is no information about company debt, but free cash flow seems to be enough. In my highly unprofessional opinion, Google is a way overpriced, but they have good management and good cash flow. I would not buy it, but if you have it, hold it.

Hmmm Just yesterday I had a crazy thought about what will happen if Google suddenly crash? Remember the crash of IT sector in 2000ish? Will the crash of this giant bring down the whole army of the internet based only entrepreneurs? As you may know there are thousands of businesses that were built around Google, or in its step footprints… Or will Yahoo leverage and save the situation?

Good night and good luck!

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This entry was posted on Friday, May 25th, 2007 and is filed under Opinions. 2,607 Views. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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