Google stock price surged on Friday to a record high at above $1000. You can see it to believe it:
And the 5-day stock performance: bravo!
The market value shot up too; Google is worth $337 b now. The day before it was worth $296 b. That is about $40 b increase in value in a day. What must have caused this difference? Either the markets were not recognizing its true worth until Friday, or it is not worth that much which markets have failed to recognize. Since both the arguments cannot be right, we have to deliberate.
The news that caused this reaction was the latest quarter's earnings report from Google. While the financial reports show strong revenue and earnings growth, the key question is whether the company is worth $337 b today.
I don't have an answer to that; but, it appears that given its current operating income, tax rate and return on capital, it takes a very low rate to discount its cash flows to get its current market value, not a comfortable situation. It seems that markets have beaten Google rather than the other way around.
It has cash pile of $56 b now and debt is very negligible at $5 b; call it the war chest, Google looks ready to embark upon its next phase of growth. And as always, growth is not free. It remains to be seen whether it will succeed over long term.
It has cash pile of $56 b now and debt is very negligible at $5 b; call it the war chest, Google looks ready to embark upon its next phase of growth. And as always, growth is not free. It remains to be seen whether it will succeed over long term.
Nevertheless, Google's historical performance has been superior.
There would be some sparks if it trades between, say, $175 b and $200 b; some kidding there.
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