Google Shares take a pounding
The Street reports a downgrading of Google and Yahoo shareswhich slid today after a top analyst downgraded the shares and lowered his price targets on both.
Quote:
RBC Capital Markets' Jordan Rohan cut his investment rating on the stocks to sector perform, saying channel checks show unexpected weakness in paid-search pricing. Rohan, who had previously rated Google a "top pick" and Yahoo! outperform, lowered his price target on Google to $200 from $250 and cut Yahoo!'s to $34 from $43.
Quote:
The $200 price target reflects a multiple of 20.2 times RBC's forward estimate of earnings before interest, taxes, depreciation and amortization of $2.6 billion and 39.3 times its forward earnings estimate."We believe this level of valuation is defensible and reasonable in the long term," the brokerage wrote. "However, the loss of momentum in the category, coupled with high investor expectations after two quarters of blowout earnings, creates a situation where investors are likely to apply a higher discount rate to future cash flows of Google."
A similar argument informed the Yahoo! downgrade
Another report on Fox News
- Y! MyWeb
Business Week gives an explanation
now this Business Week article goes into more detail
Whether you agree with him, or not, he holds big sway in the financial markets
His remarks on paid advertising being substantially down are interesting. Particularly in view of the squeals from AdSense publishers on reductions in income over the last four weeks.
Overvalued?
Absolutely. Google Inc. seems to be enjoying its own little investor dotcom boom - and bust seems inevitable. Market expectations seem very short-term.