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Wednesday, June 08, 2005

Keyword pricing decline worries hammer Google (GOOG)

Such is the life of a high-multiple stock like Google. It's down $11ish bucks today on news that keyword pricing has come down in the month of May. Considering that I was thinking of taking profits anyway, this might be a good reason. Today's action illustrates what happens to growth companies when they become overbought and there is a lack of information to support the valuation. We all know that Google is going to grow like crazy, but that is now priced into the stock. The debates will now be along the lines of how fast and how long it will grow. 75% a year for 5 years? 50% for 4 years? 33% for 3 years? This starts to matter with a company that just became the most valuable media stock in the nation in about a year.
However, if I were a long-term investor, I'd actually hold through this rough spot. Google has a good chance of pulling an eBay and continuing to outgrow expectations for an extended period of time.

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