< Return to Bulls pageGOOG primed for the recession
Google (GOOG) just now reported a solid 4th quarter (GOOG Earnings Release). Revenue after Traffic Acquisition Costs were $4.22 billion and EPS $5.10 - beating analysts consensus of $4.12 billion and $4.95. Shares are up a bit in the after hours. More importantly, Google Inc. (GOOG) has an $8.6 billion pile of cash that will only be used for “very very conservative investments,” Chief Executive Eric Schmidt said in an interview with The Wall Street Journal. The primary plan is to let the cash “pile up” as the company tries to retain its footing during the global financial crisis.
From a valuation standpoint, Google is very attractive and, like Microsoft, strikes me as being priced for a severe recession. They have $50 a share in net cash and short term investments on their balance sheet. So you get the business for about $250 a share. They earned $19.49 a share in 2008 for a trailing multiple of 13. Even if net income is flat in 2009, a 13 forward multiple for a category killer like Google in a huge growth industry is tremendous value..
