A Weird Affect Of A High Stock Price

Posted: April 18, 2008 in Technology and Business
We’ve discussed in the past that I don’t think GOOG should split its stock until it hits $1,000.  A bunch of good PR reasons.
Turns out there is an unintended consequence of toting around a huge share price:  The perception of what’s an "earnings crush!" — or, for that matter, a "huge earnings miss!"
For example, everyone is saying that Google "smashed" their earnings numbers:  Expected was $4.52 (and actually the whisper number was 4 cents lower)… but GOOG delivered $4.84.
If GOOG’s share price was "normal"… let’s say $45 rather than $450 (about what it closed at yesterday)… GOOG would have beat by 3 cents (48 cents vs. 45 cents).
Certainly a beat in the face of an expected miss is terrific.  But, I wonder how many people would have called that a crush?
Note that this has worked against GOOG, too.  They "missed" earnings by a few cents a few quarters ago, which, if divided by 10, wouldn’t have even been rounding error.  In other words, they would have made their number (and possibly avoided ensuing share price carnage).

Comments are closed.