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Subpoena Resistance Hurts Google Stock
imrec writes "Google stock sees a record 8% decline shortly after news concerning the government's request for Google's search logs broke earlier this week." From the article: "'There are potentially concerns that Google could be in the cross-hairs of the Justice Department,' Kessler said. 'Investors are worried about interest rates and inflation and they felt technology stocks like Google, Apple, Yahoo and others were able to withstand these kinds of pressure. But now that ability is in doubt,'"
The whole market's taking a hit from the Nikkei scare, and the oil prices. I doubt that most of GOOG's investors even know that there's any issue with the DoJ's unreasonable demands on Google.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
This is just flat wrong! Google's stock got clipped because the whole market went down. Investors are worried because the price of a barrel of oil went above $68 a barrel, the Nikei exchange tanked, and several Big Names reported shortfalls. Target buy prices from wall street analysts rangfe fromn $480 to $560. I wish I had a couple of million to put into this "flawed" stock! I expect to see Google at $500 before the end of 2006.
The link between the subpena[sp?] and the drop in Google's price is pretty weak. A better answer might be the decline in LiveDoor over in Japan because of securities fraud. Major financial organizations don't buy just a few stocks. They tend to buy quite a few and some do so with heavy leveraging. The collapse of LiveDoor probably jeapardize the liquidity of some of those organizations. To stay afloat they sold off a bunch of other stocks, including Google with its previous $400 valuation. If anyone's interested, read "When Genius Failed" to see a similar scenario like this that happened when Russia defaulted.
Combine that with the Nikkei's drop and higher oil prices, you can see why. Let's not forget people's knee jerk reaction. Also, some people got it on Google not because they believe in its financials or ideas but because they see the price go up and think that more people will pile on -- other people like themselves. They planned on selling as soon as the price start on a major move down. So perhaps the LiveDoor collapse triggered the move. Seeing this, they all tried to sell and thus magnified the change. This kind of thing is very common. Read "The Devil Takes the Hindmost" for some good examples. The phrase means that stock speculators all know that an overpriced stock will come down eventually but they all plan on selling out and handing it off to the next idiot and hopefully the last idiot is the devil. I'm not saying Google is pure speculation but I'm sure some of its buyers were speculators who only looked at the price and nothing else.
In any case, there are much better explanations or theories for the drop than just a little subpena. Anaylsts are not all geniuses, especially the ones that speak to the news media. I mean, if I was a genius and knew what's going on, why would I let other people know? You make money trading because you know or think you know more than the other party.
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So anything could prick a bubble.
Last I checked it was around 400 a share: http://finance.yahoo.com/q?s=goog
And its market capitalization was around 118 billion dollars. That gives them a P/E ratio of around 88 or 89.
To put this in perspective, their market capitalization, which should be around how much money their business is worth, is about 40% of Microsoft's market cap. And Microsoft is a monopoly sitting on $40 billion of cash. Their P/E is in the low 20's.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.