Never say never, especially in this kind of a brutal market environment. Who would have expected that Google (GOOG), the world’s largest and most powerful Internet company, would ever see its stock tumble to [gasp] 328 a share. Yes, 328. And in this kind of fickle, volatile market, the stock may even skid some more.
Who would have expected that Google will be selling at what some people say are fire-sale prices? In April, Google traded at 555.
Remember that Google traded as high as 747.24 on Nov. 7, 2007. Few thought it would give back a significant chunk of its astonishing gains since it became a public company in August 2004. Well, on Oct. 9, 2008, it did, mirroring the jaw-dropping sell-off in the broader market.
So what should investors do now with the stock of the Internet King?
Investors have been yearning to buy into Google at prices lower than 500. At its current price, Google is trading at a depressed [for Google, anyway] price-earnings ratio of 14.9, based on Zacks Investment Research’s estimated 2009 earnings of $21.03 per share, down from its p-e ratio of 34.6 at the end of 2007. So the undervalued and oversold condition of Google seems obvious.
“Highly Compelling”
One analyst who sees the attraction of Google at its current price is Mark May, an analyst at investment firm Needham & Co. [it has done banking for Google], who issued a buy rating on Oct. 1, when the fast-moving stock was trading at 405.
“We believe the current valuation at 15 times [based on his 2009 earnings forecast of $22.74 a share] is highly compelling,” wrote May in a note to clients. For 2008, his earnings estimate is $19.63 a share, up from 2007’s $15.58. He is maintaining his buy recommendation, with a 12-month price target of 690 a share….
I wouldn’t be surprised to see the price back up over 700 within a year or two. Last week’s panic created a great opportunity to pick up quality stocks at low prices.