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November 22, 2005

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» Google at $600? Welcome Back, Henry--Er, I Mean Safa from Tech Beat
Piper Jaffray analyst Safa Rashtchy raised his target price on Google today to $600 by year-end. I'm sure I'm not the only one who's reminded of former CIBC Oppenheimer (then Merrill Lynch) analyst Henry Blodget's famous $400 target price on... [Read More]

Comments

Sam S. Park

I couldn't agree with you more on Google's valuation. Google's future isn't yet written, and it could very well maintain the incredible growth. But it's really hard trying to justify the current market value.

People keep saying that this is a mega growth story, but fail to mention that it's going to take alot of capex to maintain that growth which, like you said, will directly hinder free cash flow growth.

I like how you point out that even if they did grow 100%, the multiple would still be high. The funny thing is that if Google did realize a 100% growth, the price will probably continue to rocket, which wouldn't change multiples that much anyways.

No matter how you look at it... like you, I'll enjoy the view from the ground. That's one risky rocket ride. One wrong move, things could really go bad.

Dimitar Vesselinov

Henry, where will the next Google come from? What do you think? I'll bet on robotics, augmented reality, virtual worlds, simulations and predictive markets. Do you want to see the future? I do.

Ron Belt

What I used to do around 99 and early 2000 is to make an analysis of what 'the market' is actually going for. I've done this for Google using a model in which I make a guestimate for the numbers for the next five years, use the current value to determine the growth for the next ten years and assume a terminal growth rate of 3% beyond 2020 (!). (you can get the model at:
http://blogofiles.blogo.nl/121/Google%20model.xls).

Guess what, I had to tweak the first five years quite a bit in order to explain the current value. On top of that, the model that 'explains' the value assumes a Compound Annual Growth Rate of 28% for the free cash flow for the next 15 years..

boonaun

Popular dillusions and the madness of crowds...charles mackay

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