You think it’s starting to sound expensive? Getting into nose-bleed territory? Take a deep breath, relax, and consider this:
1. Wall Street no longer needs to feel so antsy about Google’s ballooning payroll. After adding more than 3,500 employees over the last six months, revenue per employee - a metric that Google had said would be an important measure of its productivity - tumbled by more than 10 per cent, to $266,000 a quarter. Not good. But think of it this way: Google’s MCPE (market cap per employee) has gone up 20 per cent in the same period, to $14m. Doesn’t that make you feel much better?
2. That multiple of 45 times this year’s earnings doesn’t sound so bad when you think the shares were trading at 80 times prospective earnings at the time of the IPO. (OK, so Google was growing at more than 100 per cent a year back then, compared to 50-60 per cent now, but does the law of large numbers really apply to an exceptional company like this?)
3. When the shares hit $600 last month, Sergey Brin offered a reason for not splitting the stock: There’s no need to buy ten shares for your portofolio, just buy one. With the shares moving this fast, when does even one get probitively expensive for the children’s college fund? Back in the dotcom boom, stock splits always did wonders for already over-heated share prices, so imagine the celebration that a Google split would induce. (Note: Berkshire Hathaway’s A shares are trading at more than $131,000 each, but professional funds were set up long ago so that small investors could combine their savings to get a piece of Warren Buffett. Google Funds should be coming soon.)
So, what’s not to like?
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