Blodget: Google Stock is Worth “Only” $420

Authored by Jay Baage on July 13, 2006 - 7:40am.

Henry Blodget, infamous Wall Street Internet Analyst turned blogger, thinks that Google’s stock is trading at a fair value of around $420 (on Thursday it was trading slightly lower at around $413) and predicts Q2 revenue of 1,66 billion, slightly higher than current Wall Street consensus of about $1.6 billion.

“The stock's still expensive, the broader market is weak, a $1.66 billion number would qualify as strong but not spectacular, and I see no reason for the multiple to expand. Also, Google has now posted about 20 quarters in a row without a real stumble, and each strong quarter brings us one quarter closer to that inevitable day when even the best companies screw up.”

Blodget notes that the stock is now trading at about 40x-50x a 2006 free cash flow estimate of $2.5B to $3B. This is a vast improvement over the 70x-80x multiple when the stock neared $500, but it's still hefty, according to him.

If you want to share your view on Google’s true worth, you can take part in Blodget’s “Google Quarterly Earnings Sweepstakes” on his website (link below). He claims that his readers’ consensus has been more accurate than the Street consensus, as well as a better reflection of what the Street's real expectations have been.

Related Links:
http://www.internetoutsider.com/2006/07/step_right_up_a.html
http://finance.yahoo.com/q?s=GOOG