Barron’s Is Making Itself Look Stupid

Barron’s wrote a completely idiotic piece about Google in February of this year… and now they’ve followed it up with another.

 

Reuters reported that, "Barron’s said Google is overvalued because it trades at 37 times next year’s expected earnings and because its growth rate is slowing."

 

Last I checked GOOG’s revs were growing over a whopping 70% (year-over-year) and profits a mind-boggling 92% (year-over-year).

 

And what does slowing from these levels mean?  50% growth?

 

I grew up learning that P/E should be annual growth rate.  GOOG’s trailing P/E is 64… so this would suggest that GOOG is actually cheap.

 

However, people like Jim Cramer (CNBC’s Mad Money) believe that you should pay up to 2x P/E… which is why he believes GOOG is a howling "buy-buy-buy" (in his parlance).

 

Reuters goes on to say that, "Google now has the 15th largest market capitalization among U.S.-traded shares, and its price-to-earnings ratio is two to three times higher that of similarly sized companies."

 

Duh!  Its growth is blowing away similarly sized companies!

 

Barron’s continues to lose credibility as far as I’m concerned.  They refuse to look at the bigger picture… that there is a major secular shift going on in advertising. 

 

Does a small-time blogger really need to tell Barron’s that?

Advertisement

Google Surpassing TV

Financial Times just reported that:

 

Google is poised to overtake Britain’s main TV channels in the race for advertising revenue, underlining the internet’s challenge to traditional media.

 

… and …

A Google spokesman said the company’s growth was not a "zero sum game" which had to come at the expense of television.

Interesting.  They said TV was unassailable.  But I guess it isn’t.  So now I think it’s pretty clear that online advertising will exceed 15% of all ad dollars spent sometime this decade. 

 

Like they said with TV, "just watch."