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Google surpasses role model Berkshire in stock value

January 10, 2006 | About:
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The founders of Google, Larry Page and Sergey Brin, named Warren Buffett, the billionaire investor, as their role model when they took the Internet search company public in 2004. On Monday, Google's market value surpassed that of Buffett's Berkshire Hathaway holding company.



Google shares, which have jumped more than fivefold since the company's initial public offering in August 2004, were up $1.29, or 0.3 percent, to $466.95 at the close on the Nasdaq Stock Market. That valued the company, based in Mountain View, California, at nearly $139 billion, compared with $137.8 billion for Berkshire.



Some analysts say Google's stock price may exceed $500 before long.





Page and Brin said they wanted to emulate the insurance and investment firm that Buffett has led for the past four decades. They have avoided stock splits and earnings forecasts and aim to create "stability over long-time horizons," according to a letter to prospective investors in April 2004. By almost any financial yardstick, Google's stock is at least 4.8 times more expensive than shares of Berkshire, which is based in Omaha, Nebraska.



"Google is overvalued," said John Bank, chairman of Phoenix Electric Manufacturing, a Chicago-based investment company and maker of components for motors that was modeled on Berkshire. "Buffett built slow and steady, and, in the long run, that has more durability."





Google's share price relative to earnings, book value and sales is the highest among the 19 U.S. companies worth at least $100 billion, according to data compiled by Bloomberg. Its market value passed that of International Business Machines on Jan. 4 and that of Cisco Systems, the biggest maker of equipment to direct Internet traffic, in November. Next up for Google would be J.P. Morgan Chase, which is valued at $141.8 billion.



The company's earnings exceeded analysts' estimates for five straight quarters as Google increased advertising revenue and added features like mapping and instant messaging. It has 400 million monthly users, making it the world's most popular search engine.





"Our primary focus is on making Google more beneficial for users and customers, and on building a world-class company," Steve Langdon, a spokesman, said. "As a policy, we have no comment on Google's stock price."





Google went public on Aug. 18, 2004, selling 19.6 million shares at $85 each. It sold 14.2 million shares at $295 each in September 2005. The stock now trades at 97.4 times what the company earned in the past 12 months, compared with 20 to 22 times profit for Procter & Gamble.



The rise in Google's stock has Wall Street analysts raising their price forecasts still further. Mark Stahlman, at the investment company Caris, said last week that the stock may reach $2,000, without setting a time frame. In the past week, Safa Rashtchy of Piper Jaffray put his 12-month price target at $600, and Anthony Noto of Goldman Sachs raised his estimate to $500 from $400.



Berkshire's A shares rose $300 to $89,800 on the New York Stock Exchange. The company's market value reached a peak of $147 billion in 2004.



NEW YORK The founders of Google, Larry Page and Sergey Brin, named Warren Buffett, the billionaire investor, as their role model when they took the Internet search company public in 2004. On Monday, Google's market value surpassed that of Buffett's Berkshire Hathaway holding company.



Google shares, which have jumped more than fivefold since the company's initial public offering in August 2004, were up $1.29, or 0.3 percent, to $466.95 at the close on the Nasdaq Stock Market. That valued the company, based in Mountain View, California, at nearly $139 billion, compared with $137.8 billion for Berkshire.



http://www.iht.com/articles/2006/01/09/business/bxgoogle.php?rss

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